Going into business for yourself can be one of the most rewarding and freeing endeavors a person can embark on. At the same time, owning a business isn’t for the faint of heart or someone who doesn’t like doing their due diligence. One aspect of entrepreneurship this is most apparent is in setting up your financial arrangement in such a way that fees are minimized, but you still have access to all of the services you need for things to run smoothly. If you don’t take the time to understand the resources available to you, you risk leaving lots of money on the table by not streamlining your business, not to mention the risk of extra money owed in taxes due to poor bookkeeping.
Here are a few things to keep in mind when organizing the cash flow of your business:
Have the right accounts.
It’s hard to accept payments when there isn’t anywhere for the money to go, which means you’ll need an account at a bank or similar financial institution where you can send all of your payments. Depending on your industry of choice and what types of payments you allow, you’ll have to pick a particular type of account. Those dealing exclusively with in person point of sale type of transactions will do just fine with a traditional merchant account, while those who deal with credit card payments in certain industries may require one or more high risk merchant accounts. It’s imperative that you be truthful with the nature of your business to your bank, so they can accept the risks associated with dealing with you and also offer fees or services that best reflect your needs.
Understand your safety net.
Maintaining a business isn’t always a walk in the park, let alone ensuring its continued growth. The financial safety net of your business should be set up well ahead of time, so you aren’t stuck running around like a chicken with its head cut off should any unforeseen expenses arrive. Secure a line of credit that will help you weather any potential storm, or look at loans available to you that have flexible repayment plans. Having an adequate safety net in place is the difference between having a bad month and your business folding entirely.
Establish a system for record-keeping.
Your ability to handle your financials is only as strong as your ability to keep track of them. Previously, a dedicated accountant was just about the only way to keep all of your expenses and revenue neatly organized. But then, with the advent of highly sophisticated software and equipment, this is becoming less and less of a necessity. Anything that has a dollar amount associated with it, real or imagined, should be noted somewhere, and there should also be a system for keeping track of cash flow in real time. This way, you can accurately predict trends and know what you can and can’t pull off at any given moment in time.
Far too often, a small business will kneecap themselves right off the bat by not thinking ahead when it comes to managing their finances. Everything, from where the money is expected to go to how income reporting will be handled, should be thought of well in advance. These are things that can easily be dismissed as simple and best reserved for a later date. However, just a little bit of initiative can lead to the discovery of novel ways to handle cash flow that ensures the continued operation of any business. As simple as they might seem, many financial questions absolutely need to be answered.
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