A Guide To Managing Small Business Finances

Owning a small business is hectic. Almost all aspects of the business, from quality assurance of services to accounting, require your supervision. Just like the other aspects of the business, finances are a pillar that holds the integrity of your company. How can you, as a small business owner, manage the company finances? We’ve tried answering all your pressing questions below.

Maintain A Steady Cash Flow

Cash flow is one of the most crucial things to keep a company running. A stable cash flow is key to ensuring business operations are carried out as usual.

Understand Cash Flow

Cash flow is the total money coming in and out of a business. Providing your goods and services is what brings cash into the business while daily expenditures, sourcing equipment and inventory, monthly bill payments, and employee salaries are what take cash out of the business.

One of the first challenges new and small businesses face is having more positive than negative cash flow, or in simpler terms, making some profit. Financial business services in Thornhill suggest taking some measures to ensure better cash flow.

Look Out For Funding Opportunities

All businesses require initial funding when they are still forming a customer base but have running expenses essential to their growth.

Sometimes the funding comes from earlier savings or friends and family. Other times, businesses have to look for financing from external sources. Financing always comes with some repayment. For example, equity funding is opted for by businesses for working capital without potential repayment terms but a stake in the company and a possible position on the decision-making table.

On the other hand, loans offer more freedom when it comes to making business decisions. Both short-term and long-term loans come with their repayment terms. It is a business owner's responsibility to choose a loan whose repayment term the company can comfortably comply with.

Vigilance Around Unpaid Invoices

Your business's biggest cash inflow should come in exchange for your goods or services. Most business-to-customer services are paid for during or immediately after the service. However, business-to-business transactions can come with terms that require payment at a later time  ̶  from 7 days to 6 months.

This can mess up your cash flow because of the possibility of late payments, which are a constant risk in business transactions. Taking the legal route takes time and money, to sort the matter. It is beneficial for the company to introduce incentives for early and penalties for late payments.

The company should also initially try to get into business with trustworthy businesses by checking their credit history.

Stay On Top Of Bookkeeping

Bookkeeping is the act of monitoring the finances of the company. It helps businesses understand their current situation to make financial plans for the future.

Monitor Revenue And Expenditure

You understand your business best and have its best interest in mind. The same can't be said for other people. Regularly checking your company's financial performance will ensure your company is not involved in embezzlement or other lawfully criminal activities without your knowledge. With the introduction of the latest technology in accounting, most of the work can be done online through templates and applications.

Keep Business Finances Separate From Personal Finances

As per the experience of bookkeeping services in Canada, the first thing you want to do before starting bookkeeping is make a separate current account for your business. This account will contain information on all transactions done for the business, from buying stock and dispatching employee salaries to paid customer invoices. This ensures all your earning and spending data is in one place.

Hire An Accountant

Next, you might want to consider hiring an accountant. This is because bookkeeping can easily evolve into an intensive task that may exhaust your capacity for other responsibilities as a business owner. For example, opting for an accounting service in Thornhill can often give you holistic solutions for all your accounting needs, including filing taxes and complying with loan repayment conditions.

Keep A Good Business Credit

A good credit score has to be maintained by the business to make the most out of growth opportunities, secure more funding, and build better rapport with clients. (Remember that we discourage you from doing business with companies with bad credit). The loan repayment terms mentioned in the previous section are important because they can impact your business' credit score.

Build a good credit score by ensuring all your credit is paid within a month and bills and loan repayments are timely paid.

Managing the finances of a small business is admittedly not an easy task. Accounting Plus is an accounting solutions provider that offers business accounting, personal tax, and bookkeeping services for small business in Toronto. Their team ensures all your accounting needs are met with a solution at their one-stop shop. Contact them now for more information on how they can help you.