Designing a business plan lets you make informed judgments on daily decisions. It will serve as your guidepost since you can benchmark the results with your targets which, in turn, give you insight into the company’s financial health.
For instance, small business owners will likely file their taxes themselves due to the sometimes-misguided idea that it would save them money. However, financial experts recommend hiring an experienced bookkeeper to handle your affairs to ensure you dot all your financial i’s and cross your taxable t’s.
Without a game plan, you are prone to errors that could spell tragedy for your business. To illustrate, just the simple act of creating a separate bank account for your taxes will ensure you won’t be behind on your obligations.
Below are some tips you can follow to spring your business back to financial health:
Whether weekly, monthly, or quarterly, you must declutter your finances to know if your business is still above water or at risk of drowning. For example, you need to assess your liabilities and debts and how to address them. It’s a painful process, for sure. But unfortunately, dealing with them is inevitable.
Second, you must revisit your budget and determine if you are still on track. It’s also an excellent time to check your credit reports and insurance policies to correct any errors reflected there. Meanwhile, Carefree Bookkeeping can help consolidate your accounts and plug any financial leak that unwittingly drains your resources.
Never combine your business, personal assets, and expenses into one account. A small business owner can benefit from applying for an LLC, which automatically distinguishes your personal property from the resources dedicated to your business. It might be simpler for you, especially if you are a mom-and-pop store, but it’s a recipe for disaster.
For example, you expose your family to bankruptcy if the creditors call and you do not insulate your personal assets in creating your business. If you fail to keep your business and personal income separate, you will eventually run through a gauntlet of legal and tax troubles.
There’s value in being a penny-pincher and using your money to fund your business if you have no plans to grow your company. Otherwise, you will eventually apply for a loan to infuse more capital into your business, expand operations, hire new people, or develop new products and services.
A business debt drastically differs from personal debt, especially if you manage your money correctly. Even Fortune 500 companies borrow money to the tune of billions or millions. So, don’t be afraid to visit your local bank for a credit line. However, a bookkeeper will advise you against borrowing money to start your business. You can only use the loan to upscale your operations once you have already established yourself.
Quick tip: Applying for a loan is the swiftest way to determine if your company is in excellent financial health since no bank will expose its assets to a failing business.
Some companies craft a business plan and then forget about it. For instance, they are forced to design one when applying for a loan. Once they get the money, the document only gathers dust in one of the filing cabinets.
However, your business plan is a handy manual that will help you determine your strengths and weaknesses, spot market trends, determine if you are on pace to meet your goals, and gauge your business progress. The paper will also let you prioritize expenses, reduce debts, determine company value, and prepare strategies and timelines.
According to Investopedia, the absence of a business plan is one of the top reasons an organization fails. Meanwhile, Amar V. Bhide, in his book “The Origin and Evolution of New Businesses,” states that more than 4 in 10 organizations have no business plans. It shows you the extent that business owners take lightly the need to formulate a strategy to increase their chances of succeeding.
Meanwhile, you will benefit from the expert advice of Carefree Bookkeeping, which will help you meet your business goals. Not everyone is skilled at crunching numbers, so you can assign that task to a professional and focus on your core expertise instead.