A significant number of risks associated with running a small business revolve around its finances. When a small business’ finances are in order, the risk of failure is significantly reduced. Managing the finances of a business is not an easy task for a business owner, but it must be done. Here are some tips on the do’s and don’ts of small business finance.
The do’s of Small Business Finance
Consistently Review your Business Plan
When you started your business venture, you would have made out a business plan. This business plan works as your business’ roadmap. However, this roadmap is not set in stone and, as with any map that one follows, there are bound to be unexpected twists and turns, failures you never foresaw, delays, and even successes. All these will affect your finances and must be updated in your business plan regularly.
Invest in Professional Liability Insurance
Professional liability insurance will save you money in case a claim is filed against you or your business for negligence, mistake, or misinterpretation. Typical allegations include those against your products/services/employees for causing financial loss to a third party. Professional liability insurance will protect you and your business from financial damages that result from these claims. Professional liability insurance will cover lawyer fees, settlement fees, and expenses and costs related to judgment. The insurance will also safeguard your profitability, business assets, and your professional reputation.
Invest in Technology
Running a business can be a messy affair when processes and procedures are not aligned with the business. To ensure that all your processes and procedures are in place, invest in different types of technology that will automate several different types of processes and procedures. You can move to a digital accounting platform that will seamlessly take care of your finance management. An electronic payment platform can take care of cashless payments. Integrating an electronic payment platform with an accounting platform can make all sales transactions completely seamless.
The don’ts of Small Business Finance
Don’t mix Personal and Business Assets
While it is tempting and easy to mix personal and business assets, at the end of the day, this could lead to complications. For example, receiving and paying bills and tracking deductible expenses when filing for taxes becomes complicated when there is no clear difference between personal and business assets.
Separate credit history is easy to manage. When it comes to financial loans, it is easier to get a loan against a business account than your income.
Don’t Ignore Tax
Ensure your taxes are paid regularly. Keep your tax obligations at the back of your mind throughout the year so that you are ready with all the necessary details when the tax collector comes calling. You can maintain all your income tax affairs with a reliable cloud accounting software. Accounting software will save you time, minimize errors, and will also make it easy to spot discrepancies in your financial statements.
Don’t Fall Back on Payments
Pay bills and clear dues on time. Don’t let your bills stack up for indefinite periods. When you clear your dues to lending institutes, banks, businesses, and even the tax office regularly, you have a realistic idea of your finances. The best way to do this is by staying organized and regularly monitoring your cash flow.
While it is imperative to keep an eye on your payments and debts, it’s equally important to keep track of what customers owe you – how much they owe you and when those payments are due.