Bringing your Financial Picture into Focus
December 17, 2018
It takes more than a strong brand supported by quality images for a business to be successful. That’s why we will be bringing in guest experts with financial, legal, and other advice to help our clients and community succeeded.
Our first Guest Expert is David Burnett from Accounting Bullpen, LLC. His post offers four steps to setting up a successful business financial plan. Contact David and his team if you need help with anything from a business financial plan to offsite CFO. They will take the worry and stress from your business finances.
By David S. Burnett | December 14, 2018
Small business owners usually have a clear picture of why they went into business in the first place. Whether it is a product or service, it is usually a great idea or a passion that has presented itself as an opportunity to show the world what you can do. Unfortunately, being a small business owner also comes with lots of paperwork. You thought you had an accountant - that CPA you see once a year at tax time. What about those late nights spent diligently preparing invoices, paying bills and processing payroll? You probably didn’t count on being a bookkeeper, but without one then you have no way of knowing if you’re going over budget. In fact, few small businesses even create a budget. You can bet that if you don’t have a clear financial plan, you’re almost definitely losing money.
Here are FOUR STEPS to get your financial plan working for you:
The first step to clarify business expenses and make sense of other reckless spending is SEGREGATION. Resist the temptation of reaching into your own pocket to pay for office supplies, software licenses, business meals and similar expenses. Yes, you are your business - but muddling business and personal accounts only creates a mess. It is not that hard to maintain separate checking accounts and use a business credit card for those out-of-pocket expenses.
Once you have the business set up on its own, the next step is BUDGETING. You should know when your business will become profitable, not just cash positive. It gives you an early goal to strive for and a ready-made target for projecting future cash flow. Once you understand your breakeven point, then you know your business model works and you can start to look at your cashflow.
That leads directly to the third step, MANAGING CASHFLOW. After you know how your business can be profitable, you will need to manage your cash flow in order to pay the bills. At its simplest, cash flow management means delaying outlays of cash as long as possible while encouraging anyone who owes you money to pay it as rapidly as possible.
Separate from the budget, you need to prepare cash flow projections for next year, next quarter and, if you're on shaky ground, next week. An accurate cash flow projection can alert you to trouble well before it strikes. As difficult as it is for a business owner to prepare projections, it's one of the most important things you can do.
The final step is ACCOUNTABILITY. Your financial picture should guide all of your business decisions, such as when to hire staff, seek a loan, or invest in equipment or inventory. Your decisions will only be as good as the information you have. Therefore, you must hold yourself accountable to make sure your books and records are clean and up to date. Don’t make any big decisions without data. Gut decisions are OK, but an informed gut decision is always better.
David S. Burnett Accounting Bullpen LLC ( www.accountingbullpen.com )
David strives to create a better every-day life for a business owner whose passion is interrupted by bookkeeping. His business, Accounting Bullpen LLC, provides outsourced accounting services as a cost-effective alternative to an in-house finance operation - from bookkeeping to CFO. Using a combination of technology and experience, Accounting Bullpen functions as your virtual finance and accounting department and trusted business advisor. Contact David at (704) 238-3915, or via email at email@example.com to learn more.