Bankrupt Proof Your Business: Get Your Business Finances in Order!
A primary reason that many small businesses fail is because the Owner does not have their personal finances or business finances in order. One key area that some Entrepreneurs are not successful in are their personal finances and business finances. America is a nation that is built on credit, debt, wealth, and money. At a young age, we are taught, money and wealth are the root of success and happiness. I strongly believe that happiness brings success and not vice versa. I believe that money should be used to meet one's needs and not one's excesses.
One must learn how to use their money wisely and not foolishly. Every day in the news you hear about businesses going bankrupt due to lack of being financially ready for the “what ifs” in business. Also, Business Owners must learn how to budget their money and manage their business finances. The most successful business owners always take the time to balance their business books. The most financially secure Entrepreneurs’ secret is that they know how to balance their checkbook and keep a regular check of their income and their expenses. Before starting a business, Aspiring Entrepreneurs should take a course in Basic Accounting and Finances 101.
As a small business owner, you need to create daily practices in place that will assist you with keeping the business finances in order. Good financial practices that an entrepreneur develops in the beginning phases of the business will ensure that the business stays open. Entrepreneurs need to have a good understanding of their personal finances before starting a business. It is good to have a good grasp of the business finances to stay profitable and sustainable as a business.
Here are five basic financial practices entrepreneurs should do to have a successful business:
Financial Practice #1: Have a good recordkeeping system of the financial documents. The business owner needs to begin keeping good financial records from day one (from the time the business first opens). Good records and record keeping are needed to make plans for your company and to evolve strategies that enable your business to grow rapidly and be successful in the future and to survive in the present. Source: (Page 136) The Entrepreneur & Small Business Problem Solver by William A. Cohen (2006 3rd Edition, John Wiley & Sons, Inc.)
The basic requirements of a good financial record-keeping system are as follows:
--The system that you choose for the business should be easy to use and to understand.
--The system must be very accurate and relevant to the business. Accurate means that the record keeping system should not have any errors and conform to whatever standards you have set for the system. Relevant means important to your business.
--The record keeping system should be consistent regarding the standards and structure decided on for the system.
--The system should keep the records in a timely fashion and should always be current.
Financial Practice #2: It is important to understand Accounting 101. The most successful entrepreneurs do not have any trouble with taking a simple course or class to learn the basics of accounting. When meeting with one’s accountant, an entrepreneur should have a clear understanding of what their accountant is talking about.
Financial Practice #3: Every small business should have a good bookkeeping system. There are special bookkeeping systems set-up for any type of business out there. There are electronic programs like Quick Books that can assist an entrepreneur with keeping the business financial records in good order.
Financial Practice #4: Small business owners should ensure that they keep their books balanced. It is very critical for small businesses to maintain good financial records and ensure that the financial books are balanced. Here are the most important financial records that must be kept in order and balanced:
· Sales records.
· Cash receipts.
· Cash disbursements.
· Accounts receivable.
Financial Practice #5: The entrepreneur needs to keep track of their personal credit history. It is good for an entrepreneur to get copies of their credit reports from the three credit reporting agencies: TransUnion, Equifax, and Experian. If have bad credit, it is good to meet with a financial counselor to get assistance with setting up a repayment plan for all debt owed. You can get free assistance from free organizations like American Consumer Credit Counseling or National Foundation for Credit Counseling. Depending on the country you live in, there should be organizations to assist entrepreneurs with getting their personal finances in order.
Bonus Financial Practice #6: You must have an accountant and bookkeeper on your Business Dream Team. Do not hire your Cousin Leroy, the Tax Preparer to handle your business finances and business taxes.
These are just a few of the financial practices that any entrepreneur should incorporate when starting a business. Having good financial practices will ensure that you have a sustainable business.
Donya Zimmerman’s alter ego is the Powerful Biz Woman. The Powerful Biz Woman mission is to encourage and educate women 35 years old and older to become the CEO of their own lifestyle through business ownership. She is a business educator, author, show host, and public speaker. Donya has created the Powerful Biz Chat Live Show that airs on Facebook Live. Donya discusses everything Business Startup and Entrepreneurial Mindset. Powerful Biz Chat Live airs three times a week at 800 pm. Donya has started a movement, along with her business partner, Alina Lopez Thomas, the Ultimate Biz Conference. The mission of the Conference is to educate aspiring entrepreneurs and small businesses on how to cover their a$$ets while in business. For more information on The Ultimate Biz Conference, subscribe to www.ultimatebizconference.com to stay up to date on UBC events.
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