A lot has been said on the topic of financial wellness, but we’ve talked to a well known financial adviser and small business accounting guru and gotten some advice to help you add more insight and clarity.
When setting up a small business, it’s easy to get confused from the conflicting information out there. Not much of it often ends up being helpful.
To stabilize your finances and grow, you need focus and proper knowledge on handling your money. Here is some of the financial wisdom that he swears by.
1. Track Your Spending
The vision of your business relies on the decisions you make. After you land your first customers and gain a foothold in the market, your responsibilities are more than double. You will quickly lose track of your expenditure information.
That could be the start of a series of financial frustrations in your business.
Without the correct records, you will be in the dark when it’s time to pay taxes or compile financial reports for your lenders. Today, there are several online bookkeeping applications such as QuickBooks that you can use to set your accounting records in order.
As your investment or venture expands, managing your accounting records will likely become more challenging. A Financial Adviser can help to cut through all the accounting complications and give you clarity about the direction of your business.
2. Aim For Profitability Always
Many entrepreneurs spend a lot of time and money acquiring new customers or expanding the business. If you can do these things while maintaining cash flow in your business, then that would be good. Sadly, most of these expenses often end up leading to reduced profits and without knowing it you might not be able to stay afloat.
An experienced accountant or adviser will help to ensure that growth does not substitute profitability in your business.
According to Forbes, a staggering 83 % of companies that got IPOs in early 2018 are now not profitable. As you budget for marketing and growth initiatives, it is also important to remember that existing conditions do not favor cash inflow.
Today, businesses are struggling under trade wars, politics, and a self-correcting real estate market among other economic conditions. To attain quick profitability, keep your overhead costs low and adopt a higher pricing model that accommodates the fluid future.
3. Consult A Financial Adviser Before You Seek To Borrow
Businesses need loans to raise capital, but the financial world today is slowly being taken hostage by predatory lenders. You can often tell them from miles away by signs such as a too good offer that doesn’t match your current ability to repay.
Such lenders do not clearly state the true cost of a financial product, and when it is time to pay, they will be requesting for business details that they don’t necessarily need.
Predatory lenders will destroy your financial wellness from their hefty interest rates. Getting financial assistance from a predatory lender is the quickest way to get cash, but it is also a shortcut to bankruptcy.
It would help to seek professional counsel from a financial adviser before you go out to look for financial help. As a rule of thumb, any loan with extremely high-interest rates makes up predatory lending.
4. Have Separate Personal And Business Bank Accounts
This piece of financial advice might sound basic, but in reality, that there so many small time entrepreneurs that still do it wrong. The first thing out when you set up a business is to separate your personal from business banking accounts.
Commingling your personal and business accounts can create a tax filing nightmare. When it is time to declare your expenses and income, you will have a hard time trying to separate your personal and business transactions.
The tax office might sniff it as fraud or your relentless expenses might drive your business to losses.
5. Get Acquainted With Applicable Laws
For a healthy financial life, you will need to learn how several laws affect your business.
Regulations to do with workers compensation, occupational safety, supplier contracts, risk management, IP issues, and insurance, among others, have a direct implication on the direction of your business. If you fail to comply with these legal requirements, you risk penalties that might financially cripple your business.
Building a successful business requires financial discipline. If you fail to organize your finances, you may easily jeopardize your business and your dreams.
An experienced Financial Adviser Perth can help to reduce the risk of your business dipping into the red.