Businesses of all sizes can benefit from having a solid financial foundation. No matter how successful your company might be, it’s essential to maintain a stable financial footing to protect your assets and ensure continued growth. With that in mind, here are seven excellent tips for building and maintaining a financially sound business:
1. Keep accurate financial records and monitor your expenses
Your company’s financial records constitute a history of everything you have spent money on during your business operations. It can serve as a valuable tool for analyzing costs and identifying ways to cut expenses, so keeping them well organized and up to date is essential.
An added benefit is that accurate financial statements are a critical part of the lending process when you take out a business loan. The bank will want to see your company’s financial statements as proof that you’re a dependable borrower who pays their debts on time.
2. Have a budget and stick to it
Your business will inevitably experience fluctuations in revenue and expenses over time. Still, these changes won’t cause as much of a headache if you have a budget. Your budget can serve as a guideline for financial decision-making and allow you to make the necessary adjustments during tough times without having any lasting consequences.
Connecting with an outsourced CFO consulting service is an excellent idea since the financial professional can help you make informed business decisions. With this arrangement, you can benefit from a CFO’s knowledge and experience without hiring a full-time employee for the role.
3. Invest in a good accounting software
An essential part of maintaining accurate financial records is to use good bookkeeping software. A sound accounting system will allow you to set up the company’s structure according to your preferences and automatically generate financial reports for individuals or companies associated with your business.
Good accounting software is an essential tool for any business owner. It allows you to keep track of your expenses and revenue and generate financial reports for your business partners or lenders. In addition, good accounting software can help you make more informed business decisions and keep your company’s finances in order.
4. Maintain an emergency fund
While your emergency fund should not substitute your income, this will help you cover any unexpected expenses. It is essential to maintain a certain balance in this account at all times and keep it separate from the rest of your business’s funds.
It’s also vital to determine what you’ll use the money for ahead of time before raiding the emergency fund. This way, you won’t be tempted to use the money on anything that doesn’t qualify as an emergency.
5. Keep your business assets separate from your personal assets
Maintaining your company’s financial integrity by keeping it separate from your finances is vital as a business leader. You should also ensure that you purchase all your business assets with business money, not funds from your checking account.
In addition, when you sell assets from your business, you should not use the profits to buy assets for your home or other personal uses. If a lender asks if you have used business money for non-business purposes over the last year, you will want to answer ‘no’ without hesitation.
6. Secure your business with appropriate liability insurance
The type of insurance you need will depend on your industry. But consulting an insurance broker to review the risks involved with starting a new business is never a bad idea. Some basic levels of coverage include general liability and workers’ compensation required by law in most states.
In addition to these two types, you should also consider consulting an insurance broker to get additional coverage for your specific industry. For instance, a security consulting firm can help you find the appropriate liability insurance for consulting services if this is the type of business you run.
7. Make sure you are getting the best rates on loans and credit cards
If you have been in business for a while, it is probably safe to assume that you have a good credit score. However, consulting a financial consulting firm to review your current loan rates and determine if better deals are available will help ensure that you aren’t paying too much interest charges.
In addition, consulting professionals can also help you get the best deal on your credit card processing. Using consulting services to set up a merchant account can give you access to lower rates. This also allows you to accept all major credit cards (including American Express, Discover, and Visa).
Running a business is never easy, and it can be even more challenging to maintain a financially stable company. However, by following the preceding tips, you can ensure that your business stays afloat no matter what happens.
