Small to medium companies have been near the core of American business for decades and remain there today. It’s more important than ever for these businesses to develop financial management skills and habits for the prospect of success. Here are a few actionable, powerful steps your business can take for financial well-being.
Keep Detailed Records
Accurate and thorough record-keeping is crucial in developing a business. Set up a wide-ranging base of financial records, including income, expenses, cash flow, budget management, tax information, and other categories pertinent to your business.
A detailed record system helps business owners make informed decisions and maintain compliance. It also helps to cut down calculation errors and inefficiency.
Reconcile Bank Statements Every Month
Reconciling your financial records with your bank statements every month bolsters accuracy and finds discrepancies that need to be fixed. Look over both to find errors, unapproved or duplicated transactions, missing payments, and other fiscal details.
This step can help you maintain a steady cash flow, prevent fraud, and develop a clear picture of your financial growth over time.
Prepare a Monthly Profit and Loss Statement
A monthly profit and loss (P&L) statement gives you a clear overview of business operations and financial performance. A solid P&L report tracks revenue, cost, and expenses that help you find profit opportunities, discover market trends, and improve your decision-making. It can also help you build a budget and make better projections.
Manage Cash Flow With a Fractional CFO
A fractional CFO — something Zabel & Co. can help you with — is a part-time financial specialist who builds business strategies from an objective standpoint. They analyze business data to improve cash flow and liquidity. This gives a small business the opportunity for advanced financial knowledge without having to commit to a full-time employee.
Plan for Unexpected Expenses and Slow Customer Payments
Unforeseen events happen in every business but may have outsized effects on smaller companies. Delayed customer payments can also affect your bottom line.
Create strategies and contingencies for dealing with surprise expenses and shortfalls. These can include building an emergency fund, offering incentives for prompt customer payments, and laying out clear payment terms.
Re-Invest in Your Business
Small and medium businesses rely on reinvestment. It allows them to fund upgraded equipment, business expansion, employee training, and other important business practices. Reinvesting can also strengthen your market presence and competitive edge by fostering innovation, better performance, and sustained growth. Adjust your reinvestment allocations from time to time.
Evaluate Cost Savings Measures
Review your expenses to find opportunities for savings. Find budgeted items that can be reduced, cut, or optimized. This can include upgrading or renegotiating vendor agreements, reducing overhead, and slimming down or streamlining operations. Cost savings evaluation is another area where a fractional CFO can be of great assistance.
Keep Separate Accounts for Business and Personal Finances
Maintaining separate bank accounts for company and personal finances is crucial. Tracking each separately can eliminate budget mix-ups and back you up should any legal problems arise. It can also make tax preparation much easier.
Put Yourself on the Payroll
Some business owners leave themselves off the company payroll to accelerate business growth and mitigate taxes. However, in most cases, owners should put themselves on the payroll to earn dependable, documentary income. It can help you build transparency and streamline planning efforts.
Let a Professional CPA Handle Your Taxes
Business owners should be focused on finding ways to earn revenue and expand. Tax planning can get in the way of that process, however. Enlisting a professional CPA lets you refocus on business operations. CPAs also have experience and knowledge that can help you avoid audits, find deductions and tax credits, and meet compliance regulations.
Zabel & Co.: Steering Companies Toward Success Zabel & Co. helps small to medium companies build a successful framework for profitability and growth. We support business owners by coaching business growth, advising on technology and taxes, and serving as fractional CFOs. Our goal is to drive you toward success in both business and life. Contact us to find out more.