Manage your finances

https://www.sba.gov/business-guide/manage-your-business/manage-your-finances

http://www.fasb.org/jsp/FASB/Page/LandingPage&cid=1175805317350

2017 Hurricane Recovery: Get information about disaster assistance, or find out how you can help.

LEARN MORE

Manage your finances

Accounting for revenue and expenses can help keep your business running smoothly. Make sure you maintain proper bookkeeping and have a basic knowledge of business finances.

Content

Start with a balance sheet

The balance sheet is the foundation of managing your finances. It operates as a snapshot of your business financials. It helps you keep track of your capital and provide a cash flow projection for future years.
A balance sheet will help you account for costs like employees and supplies. It will also help you track assets, liabilities, and equity. You can get insights by separating and analyzing segments of your business, like comparing online sales to face-to-face sales.

Cost-benefit analysis (CBA)

Looking closely at money-in and money-out helps maintain a sustainable balance between profit and loss. From development and operations to recurring and nonrecurring costs, it’s important to categorize expenses in your balance sheet. Then, you can use a cost-benefit analysis to weigh the strengths and weaknesses of a business decision, and put potential recurring benefits and cost reductions in context.
A CBA is a technique for making non-critical choices in a relatively quick and easy way. It simply involves adding money in benefits and money in costs over a specified time period, before subtracting costs from benefits to determine success in terms of dollars. This can come in handy with hiring another employee or an independent contractor.
For example, let’s say you’re deciding whether to add outdoor seating for your sausage themed restaurant, Haute Dog. You estimate outdoor seating would add $5,000 in extra profit from sales each year. But, the outdoor seating permit costs $1,000 each year, and you’d also have to spend $2,000 to buy outdoor tables and chairs. Your cost-benefit analysis shows that you should add outdoor seating, because the new benefits ($5,000 in new sales) outweigh the new costs ($3,000 in permitting and equipment expenses).

Pick a method of accounting

Businesses often use either the accrual or cash methods of recording purchases. The accrual method puts transactions on the books immediately upon completing the sale. The cash method only records this once payment has been received.
For example, if you make a sale in January and receive the $200 payment in February, an accrual method would allow you to record that on January’s books, while the cash method would require that payment to land on February’s books.

Method	Pros	Cons
Accrual	Creates immediate snapshot. Can reduce tax burden.	More complex to manage. Potentially deceiving figures.
Cash	Shows cash flow clearly. Easier to understand.	Limits predictive value. Less long-term clarity.

GAAP

There are many strategies for preparing financial statements for a small business. Generally accepted accounting principles, known as GAAP or “Gap,” provides a common a way to standardize financial reporting using the accrual method. Private companies aren’t required to follow GAAP. The Financial Accounting Standards Board (FASB) maintains GAAP in the United States.

Get accounting help

You might want to get help with your accounting. Consider hiring a certified public accountant (CPA), bookkeeper, or using an online service.
A CPA will typically cost more than online services, but can normally offer more tailored service for your specific business needs. A bookkeeper can provide basic day-to-day functions at a lower cost, but won’t possess the formal accounting education of a CPA.
Ensure that someone can manage the following:

Accounts receivable
Accounts payable
Available cash
Bank reconciliation
Payroll

Manage business credit

Establishing and managing business credit can help your company secure financing when you need it, and with better terms. Business credit can be crucial for negotiating supply agreements and protecting against business identity theft.
These five steps can lay the groundwork to sound financial planning.

Determine whether you have business credit on file with Dun & Bradstreet
Establish a business credit history by using lines of credit associated with your business
Pay bills on time and understand other factors that influence your credit rating
Keep your credit files current and monitor for ratings changes
Know your customers' and vendors' credit standing

Knowing your customers’ credit standing gives you a window into consumer patterns, and that can affect your marketing and sales strategy. You may not need to conduct credit checks, but there are credit evaluation tools available for small business. Customer behavior also impacts your business’s cash flow, which affects planning for future supplies, hiring employees, and expanding your business.

Need help? Get free business counseling.

Get advice from partner organizations like SCORE mentors, Small Business Development Centers, and Women’s Business Centers. Find one now.

Was this article helpful?

Stay Legally compliant

https://www.sba.gov/business-guide/manage-your-business/stay-legally-compliant Stay legally compliant Keep your business compliant with state and federal business laws. Your legal responsibilities will depend on your business and location. Content For your own records: internal requirements Ongoing state filing requirements Ongoing federal filing requirements Maintain licenses, permits, and recertification For your own records: internal requirements You’ll need to meet external and internal business compliance requirements. Most external requirements involve filing paperwork or paying taxes with state or federal governments. Internal business requirements are for your own record keeping. You should document your compliance with internal requirements closely with company records. You might need them when you decide to sell your business or if a legal action is taken against your business. Requirements by business structu...

Club Chaos Inc.

Search This Blog

5 Truths To Outlast The Coronavirus Outbreak | Joseph Prince