Many elements go into making a small business a success. Creativity, determination and perseverance are some of the top qualities successful business owners possess. However one thing lacking is the ability, or more importantly the knowledge, to manage the financial side of the business.
So how can you avoid financial distress?
- Cash reserves - this is the most important step. Lack of cash reserves is a huge burden but starting with adequate reserves can allow for spending flexibility and a safety net that can and will assist through each stage of business development.
- Set realistic goals – this needs to be done for the whole business but most importantly when it comes to your sales/profit goals. These are what you are basing the rest of your operations on, without knowing future cash flow needs, a small business does not know how much cash will be needed to operate, service debt etc. Just as important is your personal goal for the business, what do you want to get out of it?
- Don’t mix business with personal - this goes for personnel, operations AND financial management. To mix personal and business finances is a recipe for disaster. Keeping them separate makes it so much easier for accounting, budgeting and reconciling both sets of books, and assists in determining actual profits and losses for the business
- Controlled spending and limited borrowing can also help to keep you stay on track. Big, unnecessary expenditures will create a sinkhole that is hard to get out of. You need to be choosy, only purchase what you need to get by and tighten those purse strings.
Above all you need professional assistance. Professional advice, whether in the form of small business consulting, financial, or tax advice, can help a small business avoid financial issues.
At Sound Life helping you with all your small business finances is what we do. We can explain and help you with:
Cash flow planning
Business goal setting
Sustainable asset growth
Super contributions; and
If money management and crunching numbers isn’t your specialty and you have doubts that you are on the right track, contact us!
The information contained in this blog is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial planner.