Did you know that 82% of small businesses fail due to poor cash-flow problems? All of this can be easily avoided.
If you’re a small business owner, you’ll need to have a good handle on your finances. With the right business finance tips, it is possible to make the right financial choices.
But if you have little experience in managing your business finances, it can be a challenge. Here are five smart pieces of financial advice for business owners.
1. Don’t Mix Business and Personal Finances
While it is often said, it cannot be expressed firmly enough—DON’T MIX BUSINESS AND PERSONAL FINANCES!
Not only will you make matters confusing for yourself and your accountant when it comes to filing your tax returns, but you will also be putting yourself in risk. If your business goes under, you’ll lose any money that you have tied up in the company.
2. Work out Where You Are Now and Where You Want to Be
Every business needs to have a short term and a long term financial plan. As a small business owner, you should make sure that you have a personal financial goal.
This might be a savings goal, or it could relate to personal investments.
3. Have a Back-Up Fund
As a rule of thumb, you should ensure that you have some money to fall back on in case of a change in business circumstances. Typically, your fall back fund should be big enough that you could live for three to six months on it.
By having a contingency fund, you’ll be able to manage to stay afloat in the event of a downturn or a poor season.
4. Have a Retirement Fund
You may be inclined to reinvest any spare money you have back into the business. While this might help you in the short term, it may not provide the long term rewards that you intend.
If you are hoping to build your business up so that you can live off the profits or benefit from the sale of it during retirement, you should consider having a back-up option.
You should still pay money into a regular retirement fund so that you at least have a pension to fall back on. If anything happened to your business, you’d be left with no pension.
5. Take out Life Insurance to Protect Your Business
If you died, would your business be able to function without you? If you have other employees, they might lose their livelihood in the event of your death.
Having life insurance in place can be used to protect others in your business if you die.
Never Stop Seeking out the Best Financial Advice for Business Owners
By following the smart financial tips found in this article, you’ll be able to manage your business finances better. But it doesn’t stop there—you should continue to seek out the best financial advice for business owners throughout your career.
This advice may come from financial professionals such as accountants and bookkeepers, or you may choose to make an appointment to see a financial advisor. Whatever you do, you shouldn’t ever leave your business finances to chance.
For more great articles about managing your finances, be sure to check out the rest of the site.
