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The biggest challenge that new businesses face is cash flow. Managing your expenses and finances is so important for a successful and profitable business, yet its importance is frequently overlooked by business owners who invest much more time in other areas of their businesses.
Here are some tips from Diamond Ethical to help you understand what you need to do to keep your business finances in order.
Create a Budget
Expenses are the costs a business must face in order to generate revenue. They can fall into three major categories: operating expenses, non-operating expenses, and capital expenses. To stay on top of your expenses from the very beginning, it's crucial to create a detailed business budget and stick to it.
A budget is an overview of your business's finances that has key information about your present financial state and long-term financial goals. Having clear financial projections allows you to predict and prepare for future obstacles, and it gives you a clear idea of how much money you need to operate your business. Remember to constantly revisit and adjust your budget as your business evolves.
Separate Business and Personal Finances
It's important to open up dedicated bank accounts for your business to keep track of all your business expenses and keep them separate from your personal expenses. Separate accounts will protect your private liability, keep your accounting records organized, and help avoid unexplained losses. You should apply for a bank checking account, a savings account, and a business credit card, many of which can offer perks.
Have an Invoice System in Place
Sending invoices to your customers in a timely manner ensures you get paid for your services, but late payments could cause a lot of trouble to your cash flow. Have an invoicing system in place that sends an invoice to your customer as soon as possible. You can use an invoice maker to create a professional invoice that incorporates your branding and other key information. You can select pre-made templates and customize them with your logo, brand colors, address, and more.
Track Your Cash Flow
Your cash flow is one of the most accurate indicators of your business's financial health. If your cash flow is low, you may need to approach investors to access more capital. If you are not registered as a business corporation, consider changing your structure to attract investors, as a corporation is more well-established and predictable than a limited liability company (LLC). Shares of a corporation are also easier to transfer than LLC membership rates. States have different regulations around forming a professional corporation, so make sure you do your due diligence before moving ahead.
Making it Easier for You
As a business owner, you have to wear many hats, so it's always a good idea to hire a professional to assist you with your finances if you can afford it. If not, you can find accounting software that caters to many levels of experience in finance and technology.
Diamond Ethical is a 501(c)3 non-profit organization and technical advisory firm here in the Great State of Texas that helps businesses get access to a minimum of $100,000 in funding. They could come from every walks of life with some financial needs like business funding, marketing personal financial strategies, credit boost, lead generation and business development. We’d love to hear from you!