Four Steps to Financial Literacy for Your Small Business

Managing a small business is a big responsibility and it’s one that needs to be taken seriously.  One bad month financially can be a slippery slope and before you know it you will be closing your doors forever.  With proper planning and precautionary actions you will be prepared to deal with whatever life has to throw at your small business.  Here is a list of four financial precautions to take to ensure that your small business has a long, healthy life.

1.       Make your credit work for you.  Credit scores are everything in this day and age.  Your credit history follows you everywhere and has a big effect on your businesses success.  By paying off or making payments towards your existing lines of credit, you will keep your credit history looking solid.  A positive credit report guarantees that you are able to secure a loan and will qualify your business for lower interest rates.

2.       Monitor your spending.  Create for your business a monthly budget.  Balancing your revenue with your costs will protect you from overspending.  Keeping an accurate record of your cash flow will help you predict patterns in your finances.  You can look at your previous year’s budgets to know what to expect in the months to come.

3.       Stay on top of your accounts receivables.  Small businesses depend on their accounts receivable as income.  The money generated from these accounts determines the amount of cash flow you have to invest back into your business.  Good accounting software can help you to prepare invoices and keep track of payments.

4.       Don’t be caught off guard by Uncle Sam.  Tax time can be stressful for any new business.  Keeping accurate records of your revenue, expenses and capital through the year will help you avoid this stress.  There are many tax breaks available for small businesses.  Keeping track of important receipts and expenditures can help you take advantage of these and save your business lots of money.