Small Business Finance

 




Effective Financial Management For Your Small Business


Acquiring Small Business Finance

For many people, starting a small business may involve borrowing funds if the establishment costs are higher than their available personal capital. As a rule of thumb, the amount borrowed should not be more than 60% of the total start-up costs. Some of the types of loans for small businesses include:

  • Personal loans
  • Bank overdrafts
  • Term loans
  • Finance leases
  • Commercial bills

To work out which type of finance is right for you, consult a professional lender or financial advisor. Our site offers a range of financial service providers for you to consider.

 

Record Keeping

Effective management of your small business finance starts with good record-keeping. The features of an efficient record keeping system include:

  • Recording individual business transactions
  • Compliance with legal requirements
  • Production of source documents and reports quickly and easily
  • Reconciliation back to business bank statements
  • Use of strong internal controls
  • User-friendly operation

There are many software programs available to make record keeping easier for small business owners. Many of these programs can be purchased online and will often include a demo version of the software for you trial. We recommend that you shop around before purchasing a software package as you should ensure that the software not only meets your business needs but is also easy enough for you to use.  

Small Business Accounting

Accounting involves analyzing your business records to produce financial statements and reports that show how well your business is performing. This is a specialized skill which much meet certain regulatory standards and it is recommended that you engage the services of a professional accountant (such as a CPA) to produce reports such as your Profit and Loss Statement, Balance Sheet and Statement of Cash Flows. An accountant can also ensure that you are meeting all the tax obligations for your small business.

 

Small Business Financial Management

Financial management goes one step further and involves interpreting financial information to maximize the financial performance of the business. Some of the aspects of financial management include:


  • Cash Flow Management: to ensure you have the cash available to meet the financial obligations of your business.


  • Financial Forecasts: a good starting point is to set up a monthly sales and expenditure forecast and to update this on a regular basis.

 

  • Managing stock levels: a well run business strikes a good balance between having enough stock to satisfy customer demands without over-stocking and tying up scarce cash resources.

 

  • Management of debtors: while a business can increase sales significantly by offering credit to certain customers, thorough credit checks should be performed prior to doing this. Unpaid balances should also be followed up and acted upon where necessary.

 

  • Drawing Cash: business owners should try to establish a sound level of profitability before withdrawing cash from the business. This can boost investment in the business to generate further profits.


For assistance with any small business finance issues, we recommend consulting a finance professional so that you can take appropriate actions in a timely manner. Remember that sometimes free advice from the wrong source can end up being the most costly for your business.


Take action today to maximize your business profits!