Sound financial management is one of the best ways for your business to remain profitable and solvent. Each year thousands of potentially successful businesses fail because of poor financial management. As the business owner, you need to learn how to ensure that you will meet your financial obligations.
To effectively manage your finances, plan a sound, realistic budget by determining the actual amount of money needed to open your business (start-up costs) and the amount needed to keep it open (operating costs). The first step to building a sound financial plan is to devise a start-up budget. Your start-up budget will usually include such onetime only costs as major equipment, utility deposits, down payments, etc.
The start-up budget should allow for these expenses.
- personnel (costs prior to opening)
- legal/professional fees
- payroll expenses
The accounting system and the inventory control system that you will be using is generally addressed in this section of the business plan also. Whether you develop the accounting and inventory systems yourself, have an outside financial advisor develop the systems, you will need to acquire a thorough understanding of each segment and how it operates. Your financial advisor can assist you in developing this section of your business plan.
The following questions should help you determine the amount of start-up capital you will need.
- How much money do you have?
- How much money will you need for start-up?
- How much money will you need to stay in business?
- What type of accounting system will your use? Is it a single entry or dual entry system?
- What will your sales goals and profit goals for the coming year be?
- What financial projections will you need to include in your business plan?
- What kind of inventory control system will you use?
Next: Time for you tor try one of the Self-Paced Activity Worksheets