Business Guide: Small Business Finance Tips

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Finance issues are always a challenge for small businesses. This includes everything from funding business to business internet marketing or how to select an accountant. We will discuss important tips and resources for small businesses.

Small businesses tend to have limited finances meaning that owners need to follow a few tips to maximize the available resources. That being said, the following are a few pointers that you can use to properly utilize the available resources for small businesses.

Keep proper records

You have to be very fastidious in your record keeping. This is because you’ll be able to see the state of the various departments and therefore the general health of the business. Any business guide will tell you that proper records will allow you to see which parts of the business are producing the most revenue and which parts are producing losses. Fortunately, you do not have to invest a lot of money in the records department because there are many record-keeping software options to choose from.

Invest in Insurance

You have to do all it takes to keep the available assets and resources for your small business safe. This is best done by getting insurance for the most valuable assets. Insurance means that you’ll take up more business expenses but you’ll not worry about your business stalling due to a sudden loss or accident. In that respect, any business guide will advise readers to only opt for reputable insurers in order to prevent being defrauded.

Establish proper cash flow

Proper cash flow is the lifeline of every business regardless of its size. A large percentage of the available resources for small businesses is usually money that’s used to pay bills, buy supplies, pay employees, etc. When establishing proper cash flow, you must be careful about the terms of credit offered to customers. You should only extend credit periods for very reliable customers and you should take measures to get your money back in the event of non-payment. Some of these measures include using collection agencies, adding late fees, etc. Also, any business guide will tell you that you should strengthen cash flow by reinvesting a large percentage of the profits into the business.

Market the business

Any entrepreneur should always look for ways of increasing his client base. One of the best ways of doing this is by business-to-business internet marketing. The most popular business-to-business internet marketing strategies found in any good business guide are search engine optimization and using paid traffic. SEO is where you will modify the coding and content in a site in order to get a higher SERP ranking. On the other hand, you can buy highly targeted traffic from high-traffic sites like Facebook, Google, and Twitter, etc. Business-to-business Internet marketing will get you a large number of clients and business relationships without much financial inlay.

Get an accountant

Getting an accountant is one of the best financial tips used to streamline any small business. Any business guide will tell you that a qualified accountant will help you with taxation, payroll, billing and collection, and other important aspects. There are many CPAs around that you can hire without having to invest a lot in professionals.

In a nutshell, having a proper, all-encompassing plan for your small business will facilitate exponential business growth within a short time.

Four Important Sources Of Finance For A Small Business

Starting a small business may not require the availability of a large sum of money. However, it is not possible to carry out various business activities without a proper arrangement of funds.

Sales revenue earned by the business can be used to cover the costs associated with running the business. However, in many cases, a small business may not generate immediate sales.small business copper-colored coins on in person's hands

Further, sales revenue may not be sufficient to meet the rising costs or business expenditures. In such situations, it becomes important to use other sources of finance. Let us discuss some important sources of finance for a small business.

Four Different Sources of Finance for a Small Business

Owner’s Capital

A business owner is required to contribute an adequate amount of capital in order to start the business and finance day to day activities of the business. It is important to note that this form of financing cannot be used for a longer period of time in the absence of adequate sales.

Most startup companies use this means of finance during the initial stages of business formation and till the time company starts to generate revenue. Irrespective of the form of business (sole proprietorship, partnership, private limited, etc.), the owner’s capital is the most common source of finance for small businesses.

Venture Capitalists

Though it may be difficult to find a venture capitalist initially, adequate market research and a strong business plan can help an individual in raising finance through a venture capitalist.

It is important to note that venture capitalists generally demand a substantial return on their investments made in any business/project. Before extending finance, venture capitalists generally study the feasibility of the project/business for which funding is required.

Loans from Banks and Financial Institutions

It may be difficult for a small business to obtain loans from banks and financial institutions without providing adequate collateral. Further, audited financial statements of the past few years are generally required to be submitted with the banks for evaluation of the company’s credit status.

In case it is not possible to obtain a loan from a bank, an individual may have to take a loan in his/her own name. In this case, banks will verify the financial status of the owner.

Family and Friends

An individual can also borrow money from friends and relatives. While borrowing money from friends and relatives may appear to be a cheaper option, this source of finance cannot be used beyond a particular period of time. As demand for funds increases, business owners may have to arrange funds from other sources.

Without adequate financial capital, no business can survive for a long period of time. It is therefore important for a small business to develop a proper financial plan in advance. Strict control over unnecessary expenses and focus on revenue generation can reduce the need to borrow money from other sources of finance.

Preparation of timely and accurate financial statements can reflect the company’s current financial position which can be used to estimate the amount of money needed to meet future business costs and unforeseen business contingencies.

 

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