You’d think that having steady sales and a bank balance would automatically mean that your small business is financially healthy. But that’s a faulty assumption that too many small business owners make as they’re growing their companies.
Ideally, you have an accountant to help you manage the financial side of your business, including tax planning. But even with a financial professional in place, you, as the owner, need to become financially savvy enough to understand what financial health for your business really means. You also need to be able to constantly evaluate your business’s financial position and to be able spot the signs if your financial health is slipping.
But if you don’t relish the idea of having to become more financially fluent, don’t despair. D&B says there are five steps you can master:
Like so many other things, there isn’t just one right way to monitor your business’s financial health. Ask your accountant to help you set up a system for streamlining and automating your internal financial checkups. And in the meantime, explore and compare how various experts say you should be doing it. Another take on taking the temperature of your small business’s financial health from bizfilings.com. This article echoes some of the D&B insights and adds some new ones. But bizfilings.com also suggests five steps that will keep the “out-of-business bug” away from your business.
Above all, the site says, cover the accounting basics. Practicing the fundamentals like keeping records current and keeping a sales and cash receipts journal need to be done in service of two goals:
In addition, the other steps include:
While you’re getting accustomed to conducting periodic financial checkups, business coach Sue Smiley says that business owners also need to be aware of signs warning that their business’s financial health could be on the decline. Pay close attention to these:
You’re on your way to keeping an educated eye on the financial health of your business. You won’t be able to master the process right away, but with patience, monitoring your finances on a regular basis will soon be second nature.
Image courtesy of Vichaya Kiatying-Angsulee / FreeDigitalPhotos.net