A Guest Post by Carla Lopez.
Knowing Your Small Business Financials
When you go into business, chances are you are looking to support yourself while entering a business you enjoy. From keeping the books balanced to making projections, these tips will help you ensure the financial health of your business.
Reconciling your books is one of the most important financial steps to take in your business. Reconciling is simply the act of comparing your banking and accounting records to make sure there are no errors. If you've ever balanced a checkbook, you know how to reconcile a bank account. Accounts should be reconciled monthly at a minimum to be sure all accounts are error-free. Some business owners even reconcile weekly or daily to keep a better eye on their cash flow. Hiring a bookkeeper can save you time and effort when tracking your records.
Know Your Market
The market you are working in can have a huge impact on the financial side of your business. For instance, some industries have very strong on- and off-seasons. One notorious seasonal industry is tourism. Tourism is one of the largest industries in Miami, but to survive as a business you must know what the travel seasons are to be successful. Repairs and development should happen during the off-season, and the highest rates can be commanded during the on-season.
Another example of a seasonal industry is agriculture. While most of the country is suffering cold winter weather, Miami farms provide vegetables to most of the country during this time. This is an example of not only knowing your market but leveraging it against competitors across the nation.
Once you know your current financial health, you need to estimate how things are going to be moving forward. This can help you make important decisions like how much inventory to keep on hand, predict staffing requirements, and determine expected growth and profits. Many software programs, such as PlanGuru, are available to help you create dependable projections. Best practice dictates creating two sets of projections: one on the conservative side, and one more optimistic. In the end, your actual profits should end somewhere between the two.
Create a Plan
Having an idea about your business’s financial state equips you with the information you need to plan for the present and future. For instance, if you plan on launching a product or service, knowing what targets you need to hit to be successful enables you and your team to design an appropriate strategy. In this way, understanding your finances can help you better manage your business.
Make a Budget
Once you have those financial projections, a great next step is to make a budget. Budgets and projections are not the same things. A projection is more like a prediction of revenue, while a budget is a plan on how to spend that money. When creating a budget, there should be a balance between reinvesting in your business to create growth, and saving some money back just in case. Proper budgeting can also help you keep a healthy cash flow if you work in a seasonal industry, as discussed above.
Reap the Benefits
By following these simple suggestions, you can grow more confident in the accuracy and dependability of the financial side of your business. However, you can't underestimate the importance of mindset in your business.
Whether you need an estate plan, special needs planning or require assistance with a legal issue for your business, let's take the time to examine your options in plain English and help you create your best path forward in a direction that works for you. For more information, let's set up a Legal Strategy Session to discuss the best next steps for you and your family.