One of the major challenges and struggles of most beginning small business owners is grasping and understanding what is going to be required to stay on top of the company’s bank accounts and financial position.
It would seem critical to me that a solid financial management system be put into place prior to anyone beginning business operations.
Now “solid” doesn’t necessarily mean expensive or overly extravagant or complicated.
Small online businesses don’t need to have the level of sophistication in a financial management system that might be found in a large corporation.
What is needed, though, is a management system that meets the needs of the business owner, is not too complex as to be unfriendly, and one that will allow for some scaling as the business grows through the coming years. Of course, the system should also be capable of handling the IRS (or the country tax regulation body of the owner) reporting requirements and nuances.
If you are on top of your finances, as you should be, you will have no trouble responding to these questions:
* Auditor – do you have one and know her name and address? (sometimes optional)
* Legal counsel – do you have one and know his name and address? (sometimes optional)
* Banker – do you have one and know her name and location?
* Controls – have you set up a cost system and budget?
* Can you describe your anticipated cash requirements, now and over next three years, and how these funds will be used?
* Do you know the amount to be raised from debt and the amount from equity? (optional)
* Do you have plans to “go public”? If so, what is the future value and liquidity of you business investments?
* Do you have financial statements and projections for the next three years?
* Have you prepared a profit and loss of income statement by month until break even, and then by quarter?
* Do you produce balance sheets at the end of each year?
* Do you create cash budgets and cash flow projections for all your business activities?
* Have you thought about capital budgets for equipment, software, and other capital acquisitions?
* Have you put a manufacturing and shipping plan in place? (optional)
* If financing is needed, do you have a funding request created indicating the desired financing, capitalization, use of funds and future financing?
* Do you have financial statements for the past three years?
* Do you have current financial statements?
* Do you create monthly cash flow financial projections including the proposed financing needed for the next two years?
* Do you have projected balance sheets, income statements and a statement of changes in financial position for two years including the proposed financing?
Do you know how much money you need for your business operation?
To help you estimate the amount of financing you will need to get your business off the ground, use the following checklist. For each item, estimate a monthly amount needed.
– Monthly Expenses:
– Salary of owner-manager (if applicable):
– Any other salaries and wages:
– Rent: (if applicable)
– Delivery expenses:
– Telephone: (if needed)
– Taxes, including Social Security:
– Legal and other professional fees:
– One-time start-up costs:
– Fixtures and equipment: (optional)
– Decorating and remodeling: (optional)
– Installation of fixtures and equipment: (optional)
– Starting inventory:
– Deposits with public utilities:
– Legal and other professional fees:
– Licenses and permits:
– Advertising and promotion for the opening:
– Accounts receivable:
Your total will depend on how many months of preparation you want to allow for.
Yes, there is certainly a lot to be concerned with. Think of it this way: if you aren’t “on top” of your business finances, who is going to be? Money lost after it has been earned is a waste of business effort – like burning cash deposits just for the fun of it!
To your online business success,