Tax Implications of Dissolving a Business

Posted on August 6, 2012 by admin

No matter how good or bad the situation in the economy is, many companies simply can’t stay in business and they are forced to either permanently dissolve their operations or reorganize into another entity. Without proper tax planning, both dissolution and reorganization could come with some unexpected and undesirable tax implications.

It’s important to integrate financial planning into the possibility of closing a business. It may not be something you want to think about when things are just getting started, but it is a step that can be very beneficial just in case that unthinkable happens. You need to understand how different tax laws impact different business structures because that might influence your decision on how you incorporate in the first place.

Gain, Loss, and Depreciation

If you’re business is being dissolved, that theoretically means you’re not actually making any money – so what is there left for the government to tax? While there are laws and regulations surrounding a number of taxable activities, it mostly happens during liquidation, when assets are sold off. This is taken as a sign of gains or losses or attempting to recapture depreciation. In other words, this tells the federal government that something has happened that requires some attention.

For a sole proprietorship or partnership, this basically means that any long-term capital gains will be taxed at 15%, while any short term gains will be taxed at the regular rate. A C corporation, on the other hand, will face different problems. In this case the company will first get taxed at corporate rates, and then after the proceeds are distributed to the owners it is taxed again.

An LLC has a couple options during dissolution because while they can opt for corporate tax status they still have the choice to go with a different structure to avoid this kind of double taxation. There are still a number of complex laws surrounding LLCs, though, just to make sure companies aren’t using them as a tax dodge. In the end, it’s all about knowing how your business can be taxed on any gains or losses made during the liquidation process.

Avoid Problems from the Start

During the initial, exciting startup phase of any new business, we never want to think about the possibility that it might not succeed. Unfortunately, even the best companies can find themselves in circumstances that lead to dissolution. Planning ahead from the very beginning can help avoid many of the tax consequences of dissolving a business.

One of the most effective things you can do is include a plan for this eventuality in the company’s Articles of Organization and operating agreement. This is where you can set out the rules and details for transferring interests, dealing with members leaving the company, or even completely dissolution. It may not be something you want to think about during the early stages of the business, but compared to the possibility of increased tax rates or even double taxation, you can’t afford to overlook this step.

 

Posted in financial management | Tagged , , | Leave a comment

Small Business Tip: Run a Cost Benefit Analysis

Posted on July 2, 2012 by Preston Smithson

A cost benefit analysis can be done for just about anything in life. For example, what is the cost benefit analysis of eating a cookie? You first need to assess the amount of joy you’ll receive from eating the cookie. You then need to think about how much you’ll need to work out or eat less to compensate for the cookie you ate. If the amount of joy you receive from eating the cookie will be greater than all of the other things then the cookie is yours to eat.

When it comes to business a cost benefit analysis should be done before all major and even not so major decisions. Can we afford a new employee? Do we need a new graphic design? Should we put our cash flow into new equipment or invest it in securities?

When considering a new employee as a small business owner you need to first look at all of the benefits of the new employee. Write down all of the benefits without thinking about how much time or money it will cost. What kind of work will the employee bring the company? Will it be higher quality or faster or both? Look at benefits that might not be so direct. For example, hiring a new employee might cut down the time that other employees are working overtime, certainly an addition cost benefit. Try the best you can to monetize all of the benefits in numbers. For example, with new employee will be able to increase workload by 15 pieces of content a week or 25% increase in workload.

The next step is to collect all of the costs, time and “negative,” attributes of a new employee. How much will you have to pay the employee? Will you provide benefits like insurance and 401k? How about a computer and working space? There are hidden costs of hiring a new employee that shouldn’t be overlooked. For example, you will need to consider the time it takes to train the employee and the time it will take away from the person doing the training from doing their job.

After figuring out all of the positive and negative factors you’ll need to plug the information into a spreadsheet. You’ll also need to create a long term cost benefit analysis to assess the continuing costs over a long period of time and the initial cost benefit analysis. Your cost benefit analysis should show you clearly if the new employee is justified.

A new employee is just one example of how a small business can run a cost benefit analysis. In a very crucial time, small businesses need to constantly look for ways to save money. By running a cost benefit analysis it should be clear places you can spend less money or spend more money and increase profits in the long run.

Written by Preston Smithson.

 

Posted in Latest News and Updates | Tagged | Leave a comment

Spend Management Leads to Effective Business Growth

Posted on March 8, 2012 by admin

Businesses effectively divide the money they manage into two major categories—cost and revenue. Companies can increase net income by either increasing the revenue they take in or by decreasing the money they spend out.

In down economies where revenue increases are hard to come by, cost cutting is an effective way to increase market value quickly. In fact, the revenue to cost ratio for most companies is about 3 to 1—that is, if a company cuts costs by one dollar, that same company would have to increase revenues by three dollars to have the same effect. Short-term cutting tactics such as layoffs are often used when quick results that lead to greater earnings per share are needed. A better long-term strategy for sustainable savings, however, is spend management.

What Is Spend Management?

Spend management is a long term spending strategy for companies that want to control costs, maintain sustainable value, and generate growth. This term comprises business processes like procurement, outsourcing, supply chain management, spend analysis, and payment settlement and management. It represents a holistic view of the way money is spent on the goods and services that are both directly and indirectly needed to produce a product.

Setting up an effective spend management strategy is a way that most companies can optimize the money they spend for best effect in order to build products or provide services. Some businesses may benefit from employing a “spend manager” to oversee this process.

Spend Management Tactics

Because spend management comprises such a wide array of processes, there are quite a few ways in which companies can use this strategy to save money. Generally, spend management looks to make a company’s use of money more efficient and deliberate.

  • Utilize supplier relations – Many companies are able to secure discounts on raw materials and indirect equipment by building relationships with suppliers. Companies that are purchasing different items from different suppliers may be able to negotiate better prices by directing more spend at a single or a few suppliers. This tactic is called supplier rationalization and is best done by taking a supplier-by-supplier look to find opportunities for economies of scale savings.
  • Increase efficiencies – Automating and improving processes involved in sourcing, procurement, and payment by eliminating paper trails and person touch points have the ability to save time and resources. Effective use of technology can be used to speed these processes and make them better.
  • Bidding and contract awarding – Companies can often save money and decrease time for procurement by implementing a bidding and contract award process for suppliers. Typically, a company will submit a request for proposal that invites suppliers to bid on the contract. The company then awards the contract according to pricing, delivery time, or other factors.
  • Data management – An effective spend management strategy incorporates sound spend data management practices. Compliance and control are achieved through visibility and analytics.

Spend Management for Long Term Growth

Controlling costs through these and other spend management tactics can help businesses achieve sustainable growth for the long term. A financial management company can assist in creating a strategy of spending controls and processes that can lead to an enduring increase in net income.

 

Posted in Spend Management | Leave a comment

Measuring Your Company’s Social Impact

Posted on February 28, 2012 by admin

In today’s economy, it is becoming increasingly important to look good socially to your customers. Many consumers are willing to pay more for a product that they feel comes from a socially responsible company. You prove yourself to be more social responsible than your competitors through cost-benefit analysis results, which you then carefully market to potential customers. Turning complex cost-benefit analysis results into concise and marketable information is costly but well worth the expense.

Looking Good Socially to Customers

Today, an increasing number of consumers want to buy products that appeal to a “change the world” attitude. They might be more inclined to buy your product if it:

  • Helps to fund a nonprofit effort that your company sponsors
  • Is produced in good working conditions by people who would otherwise be unemployed
  • Is made out of recycled and/or recyclable materials
  • Pollutes less or uses less energy than competing products

These social and environmental concerns, together with investor profit, make up the “triple bottom line” approach to business. In a triple bottom line business, you would seek to exceed breakeven on not only monetary costs and benefits, but also social and environmental costs and benefits. This can only be calculated with a cost-benefit analysis.

Measuring Social Impact with Cost-Benefit Analysis

When dealing only with monetary profit, a company can make very simple cost-benefit analyses that are quite similar to profit-loss assessments. However, these are inadequate for measuring social impacts. You need something more complex in which you attempt to monetize social costs and benefits. As an example, let’s say that your business provides training and job placement for injured blue collar workers. A complete measurement of the good you do might include:

  • Medical costs and worker’s compensation payouts
  • Lost worker wages that send his/her children to school
  • Future costs to society if the children grow up on welfare

By making a few assumptions, you can create a monetary figure for these outcomes and create a more realistic estimate of the good you do. When you calculate all the costs and benefits and not just the easy ones, you can prove how much your social venture is really worth.

Changing Your Company’s Image

Nike used cost-benefit analysis to change their company’s image. About 14 years ago, they came under heavy fire for employing child laborers in overseas sweatshops. Undaunted, they immediately went to work trying to turn that image around. First, they pointed out to critics that child labor under even worse conditions was common in that culture, and that Nike employees were paid relatively high wages for their area. Second, they pressured the overseas factories, many of which were outside their direct control, to reduce child labor. Third, they started a social program called the Girl Effect—an effort focused on reducing poverty by empowering women in third-world nations. Now, people focus on Nike’s Girl Effect project rather than their sweatshops.

This could only have happened by educating the public—and this was done at every step of the way by making a concise and understandable cost-benefit comparison. In a culture where most children work, is it better for them to pick up trash in disease-invested neighborhoods or to make shoes in a relatively clean factory? Is the answer to put them out of work or to help them pay their way to better education and job opportunities? By using overseas workers, Nike makes a much larger social impact. They improve the economies of impoverished nations and make enough profits on their shoes to fund large, expensive third-world development efforts.

Marketing a Cost-Benefit Proposition

Ultimately, the primary value of these social cost-benefit analyses to your business is to bring in customers. This will only happen if you know how to market cost-benefit analysis results. Accounting firms that specialize in these analyses know how to create a picture with the data that marketers can visualize. Then, all the marketers need to do is to translate that picture into a marketing campaign. When customers can clearly see the social and/or environmental value you provide, they are much more likely to buy your product or service. It may make all the difference if you are not the lowest-cost provider.

Social initiatives may be popular among customers, but investors usually need some convincing. This is done by showing a “social return on investment.” If you can monetize the social impact your company creates with its products and services, you can show even larger returns to your investors than if you just focus on money. Your social ROI is calculated using cost-benefit analysis methods, and it is marketed similarly. You paint a picture with the data that shows how your social initiatives bring in dollars they would otherwise miss. Then, your investors will be very supportive of your efforts to attract socially-minded customers.

Outsourcing a Cost-Benefit Analysis

An outside accounting firm that specializes in cost-benefit analyses is usually cheaper than doing one in-house. They require a lot of special skills that only higher-salary accountants possess. Accounting firms possess these skill sets and can charge you lower rates due to economy of scale. For that reason, it makes good business sense to hire an outside accounting firm to conduct your cost-benefit analysis. The information you can get from one of these analyses is well worth the investment.

Posted in Latest News and Updates | Tagged , , , | Leave a comment

Using Budgets to Manage Spending

Posted on February 21, 2012 by admin

Traditional line-item budgets have been employed successfully for decades, but they have one crucial flaw—they encourage employees to spend the entire budgeted amount. Employees know that whatever they don’t spend will likely be withheld the following year, so they endeavor to use all of it to make sure their funding is not cut. This leads to poor spend management and low efficiency in the company. Accounting firms can help you choose the right type of budget for your company.

Spend Management and Line-Item Budgets

The primary purpose of a budget is to manage expenses so that a business can meet its targeted profit goals. In other words, budgets are supposed to ensure efficiency. The traditional line-item budget is an excellent tool for analyzing every use of company funds, so it would seem to be a great tool for encouraging efficiency. However, line item budgets tend to encourage employees to spend everything they are budgeted due to the “use it or lose it” principle. If you try to assure employees that leftover money will not lead to a budget cut, they may or may not believe you, as line item budgeting has traditionally included automatic cuts. A better strategy to alleviate this problem is to allow unspent funds to carry over into the next year, as that encourages departments to save.

Alternative Budget Types

In recent decades, alternate budget types have been tried. Each has strengths and weaknesses that must be taken into account when using them. Accounting firms are familiar with each of these budget types, and they will help you decide which one fits your needs best. Space precludes talking about all of them here, so we will talk about two.

One alternative is the performance-based budget, which focuses on how efficiency a business achieves its desired outcomes. Company activities that produce better outcomes get bigger budgets the following year while less effective ones get cut. This approach works well because businesses should measure their effectiveness anyway, but they do not analyze individual expenses as closely line-item budget. As a spend management tool, performance-based budgets work best when companies look at how efficiently they meet their desired outcomes.

Another alternative is the rolling budget. Keeping a rolling budget is very expensive but also very useful. At any given time, your budget extends out for 12 months from today. This means that you must add a month to your budget and revise the remainder to reflect current market conditions. A rolling budget has no definite end, so there is no incentive to spend extra funds. It also provides management with a constant forecast of company revenues and expenses, helping executives react quickly to any problems or opportunities.

Expense Management Strategies

Implementing a budget is only the beginning. After all, budgets are simply guides for you to follow. Circumstances will arise that require some alterations to the budget. Projects will occasionally run over budget. Unforeseen personnel issues may arise. Someone may steal from the company. All of these eventualities will necessitate alterations to the budget, either by decreasing revenue estimates or increasing expense estimates. In both cases, you must manage your spending in order to bring it back into compliance with the budget.

The best way to get back to the budget will depend on what kind of budget you are using. If you are using a line-item budget, you can make very small cuts in multiple areas than a big cut in one area. If you are using a performance-based budget, you can temporarily slow or halt a less efficient product line to focus on a more profitable one. If you are using a rolling budget, you can revise the following months to make up for the loss.

Each budget type has its strengths and weaknesses, but each is a useful tool. Accounting firms can help you design the best budget for your needs—one that will maintain efficiency while helping you to be effective and profitable.

Posted in Latest News and Updates | Tagged , , , | Leave a comment

Is Your Business Taking on Big Profit Losses?

Posted on February 14, 2012 by admin

Gross profit is defined as the difference between a business’s total sales revenue and its total direct cost. This number is an important metric in determining the overall health of a company. Gross profit is affected by a number of items that must be monitored closely by accountants and managers alike.

If your business’s gross profit is not as high as anticipated, you will need to make changes in sales revenue, costs, or both. Determining where to make these changes, however, is not always clear.

Creating a Profit and Loss Statement

In order to judge your business’s operating efficiency and determine where you need to make adjustments, a profit and loss statement is used. This statement lists all revenue generated by the business and all expenses incurred.

Creating a profit and loss statement is an absolutely essential accounting function because it indicates where a business is generating revenue and where it is losing money. A profit and loss statement is also used to compare the actual performance of a company with its revenue model in order to make important business decisions.

  1. Determine the period for which you need to determine the overall profit or loss of your business.
  2. Calculate your business’s total net sales amount.
  3. List your company’s beginning inventory, purchases, labor costs, and other expenses directly related to the production of your goods and add these items together. Subtract the company’s ending inventory amount to get the total cost of the goods.
  4. Subtract the total cost of the goods from the total net sales to get the total gross profit.
  5. Calculate your company’s operating income by determining your company’s total expenses including general and administrative expenses. Subtract this number from gross profit.
  6. The total net profit or net loss before taxes is determined by taking the difference between the operating income and interest expenses.

What factors can affect gross profit?

If you are looking for ways to increase gross profit, there are a number of factors that you can adjust. It’s important to realize that both increases in revenues and decreases in costs produce a higher gross profit, and both avenues should be explored. The profit and loss statement is extremely useful for determining where your money is coming from and where it is going.

Both external and internal variables can affect sales. Examples of the kinds of things that can change the number of goods sold are economic climate, pricing, marketing effort, and even the weather. To increase sales revenues, take a look at the factors that you can control to make your product more enticing to potential customers.

Price changes in both materials and labor can also affect gross profit either for the good or bad. When the price of raw materials goes up, for example, and it suddenly becomes more expensive to produce your product, your gross profit will likely go down. On the other hand, streamlining the cost of labor by managing human resources effectively can increase gross profit.

Inventory method changes can also have an impact on gross profit. By adopting a first in, first out (FIFO) inventory method, the earliest-purchased products are used first. Products purchased earlier are considered cheaper because of inflation.

Avoiding Big Profit Losses

By adopting the practice of keeping an up-to-date profit and loss statement, you can see exactly how your business’s money is being used and thus avoid unnecessary losses. A financial management firm can assist you in creating these important documents and interpreting where you could make changes that result in a larger gross profit.

Posted in Latest News and Updates | Tagged , | Leave a comment

Give a Great Financial Statement ‘Valentine’ to Investors

Posted on February 14, 2012 by admin

Valentines for InvestorsIt’s Valentine’s Day, and thoughts of love and relationships are in the air. Just as couples date to strengthen their personal relationships, your business must ‘date’ your investors to keep their support. Once a year by law, you are required to send them a long and lengthy ‘valentine’—a set of financial statements telling them of the return you made on their investment. Besides keeping the books and filing taxes, a certified public accountant can also help you prepare financial reports that will tell your investors you love them.

Make Statements Understandable

Investors want ‘valentines’ they can read. If your financial statements don’t speak their language, they won’t be too thrilled. They may not give up on you right away, but they will be more cautious. And caution does not lend itself to a strong relationship. Therefore, you need to learn how your investors speak and make good use of the Discussion and Analysis sections to tell your story. A good certified public accountant (CPA) knows how to get investors excited and make them happy they invested in you.

What makes the footnotes section of an annual financial report interesting? First, it has to tell a good story, as we discussed in our last post. Second, it needs to tell them how you provide them with value. Third, it is required by law to identify threats to your company and what steps you’re taking to avoid those threats. A CPA knows how to turn this into a win by telling investors how the company is protecting them. And just as they know how to make annual reports interesting, good CPAs can also entertain and inform investors with creative quarterly reports.

Write Creative Quarterly Reports

Quarterly reports can be even more effective for courting investors than annual reports. You can’t keep your shareholders invested in you through annual statements alone. Quarterly or even monthly statements to your investors are important in helping your investors feel connected to you. And the neat thing about these statements is that they are much less regulated, so you can really make them concise and marketable. Many investors who are too intimidated by annual reports to open them can feel right at home with a small and pertinent quarterly report.

Your quarterly statements could be part of a newsletter that not only tells your customers how profitable you are, but how popular you are as well. When your investors see that your brand has a big following and you’re gaining recognition, they will keep investing. If you also provide awards and/or prizes in the newsletter, they will feel more like a part of your company. You could even put out a quarterly video where you take them on a tour of your business and show them how their money, through you, is bringing in profits. Be creative.

Choose a Fantastic CPA

You’ll know an excellent CPA by the skills they possess beyond accounting. The difference between a good CPA and a great CPA is that great ones can bring the data to life and incite the reader to action. You want your valentines to your investors to say, “We love you and will provide you with profits. Trust us to make even more money for you.” An excellent CPA is also a marketer who can build a strong, positive message into your financial statements.

Besides being good at communication and marketing, a great CPA will have enough legal training to understand tax laws and business regulations. It’s far better on your costs if no lawyer is needed to read the latest tax code or business-related legislation. A fantastic CPA will add general business strategy consulting to the list of services. Such a CPA can be an all-in-one go-to expert and consultant for your company.

Take the time to find a high-caliber CPA who can communicate well, court your investors, understand the latest laws, and offer sound business advice. Such a CPA can realize profits that will more than pay for his or her services. They can make your business look so successful that your investors will prefer reading your profit report to reading a valentine.

Posted in Latest News and Updates | Tagged , , , , | Leave a comment

Telling a ‘Story’ with Accounting

Posted on February 7, 2012 by admin

Accounting has more than one purpose, and some of these purposes cannot be accomplished through numbers alone. In a financial report, the actual financial statements make up only a tiny fraction of the total report. The rest of it explains those statements by explaining what the numbers mean and what may have caused them. An accounting ‘story’ provides a context for the data to be interpreted. It uses facts and theories to explain the numbers and make them mean something to decision-makers.

Many small businesses try to do their own accounting almost completely through software. While software like Quickbooks can certainly produce the numbers for financial statements, it cannot tell a story about those numbers. One of the best small business financial services available is financial statement preparation. When a small business outsources their accounting, they can get affordable reports that tell a meaningful story about the data.

What Makes Financial Reports Useful?

Financial statements alone do not help executives and managers make decisions. They may show how different today’s revenues and expenses are from last year, but what does that really tell you? Not much, unless you can determine why things have changed. The report that accompanies the statements can make all the difference when making decisions. When the report can communicate the reasons why costs went up or why certain products lost sales volume, it is much easier for management to react.

Explaining financial data is a critical part of both financial and managerial accounting. The many regulations surrounding financial accounting specify certain ‘stories’ that must be clearly communicated to investors, such as what the biggest threats are to the company’s profits and why. Managerial accounting must get even more detailed and offer solid explanations for costs and revenues and even include reasons for customer behavior. This goes beyond traditional number crunching into areas that few small business accountants have the time and/or skill sets to delve into.

What Can Financial Service Firms Do?

Because they specialize, accounting firms can produce much higher-quality financial reports for less money than are possible for small businesses. They have resources in place that enable them to collect and analyze massive amounts of data much more quickly than would be possible for a small accounting department. Also, their experience with other companies’ data helps them see yours in a different light. They can provide context for your data based not only on your business experience, but the experience of many other businesses as well. They have a wealth of knowledge to provide.

When you outsource to an accounting services firm, they will first establish a data gathering system to provide them with enough data to write truly helpful financial reports. Then, they will watch those numbers and analyze them regularly for trends. When the time comes to prepare investor reports, they will address all the questions your investors are entitled to answers for. If the accounting firm also handles (or assists with) your managerial accounting, they will work with you to determine what data will help you the most. They will then determine causes when possible, or at least correlations between data points to produce a clear picture to management that makes decisions easier.

Making Decisions Based on Helpful Data

When you know the reasons for changes in expenses, the relative profits of various products, and the change in revenue throughout the year, you can make much better business decisions. Instead of reacting to change, you can proactively adjust your business strategy to anticipate trends revealed by the data. You can also determine what questions to ask in customer satisfaction surveys in order to get even more valuable data. When you outsource your accounting, the non-numerical information provided by small business accounting services can make all the difference between mediocre performance and spectacular success.

Posted in Latest News and Updates | Tagged , , , | Leave a comment

Financial Services that Small Businesses Need

Posted on January 31, 2012 by admin

Small businesses do not always have an easier time managing their finances.  In fact, many small businesses face greater accounting challenges than larger companies. In an economy dominated by very large corporations, small businesses have little room for the overhead costs that come from accounting. If your business faces this situation, you may want to seek small business financial services from an accounting firm. Such firms can provide a less costly solution to small businesses than handling accounting in-house.

Inventory Accounting

One challenge that small businesses face is in accounting for inventory. Many small businesses offer a huge variety of products. If a small, stand-alone rural store sells everything from fruit juice to saddles to cell phones, it needs a highly complex accounting system. If a business sells only used items (such as a pawn shop or used car market), it must account for every item individually. When such businesses try to handle accounting in-house, they often cannot keep their overhead costs low enough to compete with larger competitors.

A financial services firm can provide smaller businesses with lower accounting costs than they would experience in-house. This is because of “economy of scale,” which means that the cost-per-service goes down as more services are offered. An accounting firm already owns powerful accounting tools, so it costs them less to provide complex accounting services. To be specific, it may cost your pawn shop a dollar per item to do all the proper accounting while a financial service firm may charge only 60 cents per item. This can enable a small business to compete with larger businesses on cost.

Financial Statement Preparation

Preparing financial statements and budgets requires a lot of special expertise. Most small businesses are not able to hire all the expertise they need in-house. In such cases, it can reduce your costs to get assistance from a financial services firm. The strict guidelines governing financial statements make it particularly important to get help when preparing them. However, firms can also make the budget process much faster and more effective. Both types of documents require special expertise in analysis and writing that can be difficult for a small business to hire in-house.

Decision Assistance

A financial service firm can provide experienced advisers who can aid small businesses in making good financial decisions. Because they deal with businesses of all sizes in a variety of situations, they have a wealth of experience to draw on when they analyze any problem you may face. Regardless of how creative you may be, they can come up with more possible solutions due to their vast experience. Their help can make all the difference in the world when you encounter a new competitor or something changes drastically in the market.

The above services are just a sampling of what a financial firm can do for your small business. The benefits of these services can help you maximize your revenues and minimize your costs.

Posted in Latest News and Updates | Tagged , , , | Leave a comment

Taking a Small Business to the Next Step with Financial Management

Posted on January 24, 2012 by admin

Small Business Financial Management TipsManaging a successful small business in this difficult economy is no small accomplishment, but the good news is that even now there are a lot of companies that are poised to take things to the next step and expand their offerings. Financial management is the key to making this change successfully, but that’s a fairly broad term that encompasses many different aspects.

Financial management tasks involve tracking, controlling, and using financial resources as effectively as possible to minimize the risks involved with growing the business. The most common tasks include accounting, financial reporting, budgeting, collecting accounts receivable, risk management, and insurance. While it’s often possible to do these things on your own as a small business, things will get a lot more complex as you start to grow.

Many managers will make the mistake of attempting complete spend management control over every aspect of the growing business. As the company expands into new areas, though, this just isn’t feasible. Many entrepreneurs have burned out trying to do it all on their own. There may be some software tools out there that can help someone handle many of these tasks, but sooner or later your time will become too valuable to spend on bookkeeping.

Money Management and Financing

You shouldn’t try to just “get by” when it comes to managing the finances of a growing business. You need to set up an accounting system that can cover a wide range of jobs. This means having measures in place to collect on bills, pay employees and set up their benefits, compensate suppliers, and pay your taxes. All of this has to be done on time and on a regular basis.

In order to manage the company’s finances, you have to try and see the big picture. You have to know how the money is flowing through your business and how your assets and liabilities are affecting the company. At the same time you have to keep track of the small details – the everyday expenditures and income that support the big picture.

Once you’ve gathered this kind of information, you will be better prepared to start growing the business in effective ways. You will know what options are available for financing major purchases and backing new projects. You can decide whether asset-backed financing is a good idea, or if it would be better to look into different leasing options.

Financial Planning

Financial management is an ongoing process, but in order to be really effective you need to continually plan ahead. This kind of financial planning requires that you identify the resources you have available to you as well as those that are necessary to achieve your goals. As a growing company you will also have to develop relevant and realistic budgets, so as you continue planning and forecasting your future endeavors you can minimize the risks and remain successful.

Once you’ve taken the first step toward growing your small business into something much larger with a wider reach, careful financial management will help you continue to be profitable. You may have been able to do a lot of these tasks on your own while the business was still small, but now it may be time to work with someone who has been specifically trained to see the big picture and make the most of the small details.

Posted in Latest News and Updates | Tagged , , | Leave a comment