It’s a well-known fact that most small businesses won’t survive beyond their first five years of operation. If you want to avoid becoming part of this dismal statistic, it’s crucial to manage your finances well from the start. Without the money you need to purchase raw materials, pay rent, and meet overhead costs, your business simply won’t thrive.
But as a fledgling business owner, you’re probably searching for ways to cut costs. Until you become more well-established, you may not have the luxury of hiring a full-time accountant. In the meantime, you’ll need to learn how to manage your company’s financial matters on your own. Here are a few ways to keep your finances in order when you can’t afford an accountant.
Develop a Financial Plan
Before embarking on any new professional venture, it’s wise to develop a financial plan to guide you along the way. This will help you avoid overspending and will give you fiscal goals to reach as you grow your business. Your financial plan should answer these three questions:
1. How will the business make money? This could be with goods, services or both.
2. What is your current and projected operating budget?
3. What do you need to do to achieve your short- and long-term financial goals?
You can map out the above information on a standard spreadsheet when you’re first getting started. However, this approach will quickly become complicated and time-consuming as your business continues to grow. You’ll have an easier time developing and following a financial plan if you use accounting software.
Some accounting software programs help you control your cash flow, manage your finances, and automatically pull receipts and bills into one location. Automated features like these can help save you time while keeping your paperless financial records organized and easily accessible.
Identify Your Small Business Goals
Once you have a basic financial plan in place, it’s time to identify your small business goals. Start with short-term milestones and work your way up. For example, you might begin by determining how much product you want to sell next month. How much money do you need to spend to secure the raw materials or inventory to meet your goal? Create and follow a budget, then monitor how close you can get to your goals.
Once you’re consistently meeting monthly milestones, extend your goals out to a few months, then a year. Before you know it, you’ll be creating a budget to help you meet growth goals that are still five years out. Before making a big change to your business, always make sure you have the financial means to support it.
For example, if you plan to hire additional staff next quarter, you’ll need to ensure you have sufficient cash flow to support your aims. Writing down your current assets and expenses can give you a snapshot of your financial health so you don’t exceed your fiscal capabilities.
Craft Financial Projection Contingency Plans
You’ll have an easier time building a successful business if you create financial projections. These should be based on your sales forecasts and anticipated expenses. Don’t be afraid to play with the numbers based on both worst-case and best-case scenarios. It’s wise to be prepared for all possibilities.
If there’s one thing you can count on in life, it’s disruption. Financial projections and predictions don’t always pan out as expected. If the market takes an unanticipated dive and your cash flow dries up, what will you do? A good financial plan should take contingencies into account.
For example, you might apply for a large line of credit now so you can access it quickly in a pinch. Or, you could hold some cash reserves aside to keep your business afloat during tough times. As a last resort, you might consider selling some of your assets to avoid dipping into the red. Planning for the worst could mean the difference between declaring bankruptcy when times get hard or having enough in reserve to make it through.
Prepare Early for Taxes
The words “tax season” are enough to strike fear in any small business owner. The last thing you want to do is make a mistake and earn an audit from the Internal Revenue Service. To avoid last-minute scrambling and skyrocketing stress levels, make it a habit to prepare early for tax season. Begin compiling financial records months before you need to file, including:
- Bank deposit slips
- Accounting ledgers and journals
- Credit card statements
- Bank account statements
- Vehicle and mileage logs
- Invoices, paid and received
- Income statement and balance sheet
- Receipts for business-related expenses
Don’t forget to make note of any tax credits and deductions you qualify for. Some common examples of write-offs include investment credits, alternative motor vehicle credit, general business expenses, rent, and mileage.
Keeping your finances in order as a small business owner can feel overwhelming. But if you’re savvy enough to build a startup from the ground up, you’re certainly capable of monetary management. If you don’t yet have the ability to hire a full-time accountant, it’s important to step up to the plate and take matters into your own hands. Use these tips to help you stay on track financially and continue growing your small business.
