Small business owners we work with at SmartBiz Loans experience some kind of financial difficulty at times. This can result in a significant impact on the bottom line and hurt opportunities to secure low-cost financing.
Understanding finances is the first step to mastering the demands of running a business.
April has been declared National Financial Literacy Month and we're rounding up a few financial "must knows", especially if you’re applying for an SBA loan with SmartBiz.
What Do Business Owners Need to Know?
Keeping track of finances is fundamental to the success of every business. Aspects of business finance include:
- Basic bookkeeping and accounting
- Managing Payroll
According to an SBA guide, creating a budget is the first place to start with your financial management practice. Investopedia describes budgeting as estimating and matching expenses to revenue (real or anticipated). It’s important because it helps small business owners determine if they have enough money to fund operations, expand the business and generate income for themselves. Without a budget or a plan, a business runs the risk of spending more money than it is taking in or not spending enough money to grow. The good news is that you can put away the pencil and paper. Software can help you budget. Capterra has a list of the best rated here: Top Budgeting Software Products
There’s lots of great information out there that can help you understand bookkeeping fundamentals. Check out The 10 Bookkeeping Basics You Can’t Ignore. SCORE, a non-profit organization dedicated to helping entrepreneurs, published this article. Visit the SCORE website for a variety of resources related to bookkeeping. You can even book a free appointment with a SCORE mentor who specializes in small business finances.
If you have employees, it’s imperative that you get a handle on your payroll responsibilities – paying employees, paying taxes and filing forms. There are several ways you can run a successful and legal payroll system:
- Do it yourself by hand
- Do it yourself with payroll software
- Use an accountant
- Outsource your payroll
To help you decide the best strategy, the SBA has an article that breaks down payroll management in easy-to-understand language: 10 Steps to Setting Up a Payroll System
For information about small business taxes, it’s best to start right at the Internal Revenue Service. The IRS has comprehensive resources for taxpayers who file Form 1040, Schedules C, E, F or Form 2106, as well as small businesses with assets under $10 million. Visit the section of the IRS website dedicated to small business here: https://www.irs.gov/businesses/small-businesses-self-employed
Forecasting is the use of historic data to determine future trends. If you’ve ever reviewed revenue to predict how much you’ll make the next month, you’ve already started forecasting. Forecasting can show how to allocate your budget or plan for anticipated expenses for an upcoming period of time. The goal is to make sure that enough money is available to keep the business up and running, to grow, to compete and to establish a solid emergency fund. For more in-depth information about forecasting, visit this SmartBiz Loan’s blog post: Forecasting 101
Has a review of your finances determined that an infusion of low-cost funds could take your company to the next level? If so, an SBA loan is usually the best bet for small business owners. If you’ve been in business for two years, have a strong credit score and a healthy income, you could qualify in just 5 minutes with no impact on your credit score here.