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It doesn’t matter if you’re building a business from the ground up or are part of a huge corporation – at the core, the business finance concepts are the same.
What does matter? Knowing the basics when the financial responsibilities are in your hands (or directly affecting your wallet)! If you want to make sure you’re prepared for managing your small business, read on for a handy run-down on business finance basics.
Business finance relies heavily on bookkeeping, or the recording of financial affairs, so prepare to get organised! Tracking the flow of your money in the following categories is absolutely crucial to growing and maintaining a profitable business.
1. Income and Expenses.
. Just as you should monitor and budget your personal income and expenses, you should document the income and expenses of your small business. Most new businesses will struggle to drive the income they need in the first couple of years, which is why many begin with a small business loan to get their company up and running. As you record your income and expenses, you’ll be able to see the overall growth of your company year to year, and will know when your business has more wiggle room for desired expenses, like new equipment or staff retreats.
2. Accounts Receivable and Accounts Payable.
What do you owe other companies and how much do they owe you? Having a calculated system for dealing with invoices makes it easy to check how your business is doing, prioritise paying others, and chase invoices you’ve submitted to others when the cash flow is delayed on their end.
3. Inventory and Cash.
It’s easy to overlook these categories since they’re not included in your bills and don’t appear in your bank account. Keep a detailed log of your petty cash expenditures, and make sure all inventory is tracked through a labelling system so you’ll know your company’s total assets at all times.
4. Employees and Payroll.
Unless you’re running your operation solo, there are others to account for when it comes to tracking business finance. Make sure you’ve consulted employment rules for your state and that everyone you’ve hired has filed out the proper forms necessary for taxation each year. It’s essential to keep taxes and yearly budget in mind before hiring anyone, as well as the financial compensation you’d need to provide were you to dismiss an employee.
5. Debt Financing and Equity Financing.
Most small business owners can’t avoid borrowing money and/or taking on investors to fund their business endeavours, even once their business has matured. Don’t be afraid to take those steps, but do make your payments to others a priority so you don’t end up incurring further interest or losing investors.
Now that you know the basics of business finance, it’s time to get your small business growing! If you need help with business funding or cash flow, Speedy Finance is a responsible lender with many options for instant loans. Learn more about our business loans here, or contact us to find out how we can help your small business succeed.