How to Manage Small Business Finances Successfully

Financial stability is vital for the success of a small business. However, the search for financing options is a process that can expose unexpected obstacles and limitations to funding. Once you have the funds, implementing financial and accounting best practices is essential to growing your business. 

But that’s not necessarily what a small business owner wants to think about. Thankfully, many CPA firms offer small business accounting and financial services to ensure your finances are the best they can be, and to set your  small business up for success.

Before you consider hiring a financial advisor, research how to finance your business. Examine a handful of financing options to determine which will work best for you under current market conditions. Options include:

Secure a loan – Apply for a small business loan from banks or the Small Business Administration (SBA). Taking out a loan is a common financing strategy used by companies of all sizes. To apply, first prepare a business plan, value proposition, expense report, and five-year projections. This information will be used by the lender to determine how much they will  loan you. Established businesses sometimes use bank loans to ‘leverage’ company assets—a topic for another day!

Secure an investment – Investors can be great for kicking off a business, though the field is highly competitive—you’ll need a business pitch that excels. Remember that securing investments can be a long process and take years. Also, investors expect to own a share of the company in return.

Crowdfund – This funding method is used by small startup business owners who believe they can build a solid fanbase. Fans can donate funds on a crowdfunding platform in exchange for a reward, like a discount or special perks. This option is low-risk, and you own your company. Typically, crowdfunding is best for b2c. 

Self-finance (bootstrapping) – One of the simplest and most beneficial ways to start is to rely on your own money and resources to finance a business or fund growth initiatives of an existing small business. Other ‘would-be’ investors will respect the fact that the business owner has some skin in the game, and lenders will require it. So, there are benefits to investing in yourself before you expect others to invest in your business.

To bootstrap, use a day job to fund your business, tap into personal savings, borrow from 401(K), or use credit cards for initial expenses. When you self-finance, you retain full ownership of your business.

Grants – Lastly, apply for a small business grant from local and state governments. Grants are usually industry specific, so see what’s available and if you qualify. Grant money is like a gift since you do not have to pay it back. However, more likely than not, a business grant will be  taxable as income to the business.

Once you have the money to launch your business or growth initiative, keep expenses as low as possible. And remember that cash is king! So, implement a process to regularly monitor the return on your investment, so you can make course corrections as needed and as quickly as possible. 

Plus, having a financial planner or advisor comes in handy when monitoring business growth and developing course corrections. Regular financial oversight is an essential part of owning a business, especially when planning for growth.

Now that your business has money coming in  and you’ve established efficient processes for running your business, learn how to use your money wisely. To start, consider hiring a financial advisor to guide you through options to save, to invest, and to mitigate marketplace risk. 

From a broad perspective, a business financial advisor or CPA helps you by reviewing your books and providing insight crucial for financial decisions. Remember that there are multiple financial and accounting services for small businesses to choose from.

For example, an accounting service can include:

• Measuring cash flow against upcoming liquidity needs
• Monitoring compliance with debt covenants
• Reviewing account balances on a balance sheet when developing strategies to pay off debt or cut expenses
• Producing financial reports to inform your financial decisions
• Tracking payroll and employee benefits

And many more services.

There are many ways accounting services can help. So, for small businesses to achieve financial success, knowing which accounting and financial services will help your business the most will save you time, money and energy.

Do you have a good understanding of which “Key Performance Indicators (KPI)” are used for businesses in your industry? Perhaps your business lacks proper financial reporting to see if you hit your KPIs. As a result, you may be unsure which benchmarks to use for your business’s  current growth stage. Monitoring appropriate KPIs will help you improve the performance of your business and refine plans for growth.

Most small businesses likely cannot hire an experienced full-time CFO just yet. Thankfully, small businesses can outsource a CFO for a fraction of the cost. With CFO services, you have someone who can . . .

• Generate industry-specific and easy-to-read reports
• Generate budgets and financial projections
• Oversee financial operations and systems and optimize them
• Prepare the CEO for board meetings
• Raise capital efficiently, so you can manage the direction, growth and development of your business

Plus several other services.

Financial planning includes anticipating what may happen in the future. No one wants to assume the worst in people or anticipate experiencing fraud and embezzlement. However, small business owners should take precautionary measures to prevent fraud at the most basic level by implementing processes with built in separation of duties. Doing so will reduce the opportunity for such behavior. 

Your company earned money with hard work; ensure your earnings do not slip through your fingers. A trusted CPA can suggest useful methods you can easily implement to reduce the opportunity for fraud and to set your business up for long-term success.

Staying on top of finances and cash flow is vital to any business, and using accounting services with a financial advisor is a cost-effective way for small businesses to manage  finances without hiring a full-time or in-house accountant.

A financial advisor can help your small business . . .

• Make informed financial decisions
• Stay ahead of tax obligations 
• Free up your time to plan and operate your business in the areas best suited to your skills
• Develop efficient processes for seamless management of operations while mitigating risk of fraud and embezzlement
• Evaluate where to cut unnecessary expenses to save money
• Pay on time every time and avoid late fees or interest payments

So, do you absolutely need a financial advisor for your small business? Perhaps not. You may get by with only an online accounting software. But for your small business to have ongoing success, hiring a professional to help with finances can make a huge difference in your business’s growth.

The cost of accounting services will vary depending on your needs. However, the beauty of using an accounting service is that there are options that will allow you to only pay for services you want. 

However, accounting professionals understand that’s not the best position for small business owners. The difference between paying for what you want and paying for what your business needs may be the difference between crawling forward and leaping forward. Because of this, it’s becoming more difficult to find à la carte services. Instead, many firms require clients to use more comprehensive service plans. These plans place the CPA in a better position to affect a successful outcome for the small business.

On average, accounting costs vary from a single meeting charge to recurring charges for ongoing services. Many CPAs offer a free initial in-take meeting to prospects so they can determine if the firm is a good fit for the client.

Potential small business accounting costs: 

• A one-off service can be as low as $750 for the initial meeting. 
• Monthly accounting services typically have a minimum charge of $500/mo.
• Annually, it’s not unusual for small businesses to spend anywhere from $4,000 and up on accounting services. Many times the lower end is accounting software costs alone.

To know precisely what you can expect to spend, contact a local CPA for small business services, like TriStar CPAs for a quote.

If you are looking for a financial advisor to help you grow your small business, contact us at TriStar CPAs in Nashville. Our services include advising, consulting, compliance, and resolution services. We also provide write-ups, periodic reporting to the owner or board, and all filings with local, state, and federal governments. Furthermore, we help small businesses establish separation of duties, which lowers the risk your company will experience fraud and embezzlement. 

Let’s partner today!