Every business owner knows that it is important to protect their assets. What they may not know is that they need to protect their finances too. Without money, a business cannot grow or expand, and if a business goes bankrupt, it ceases to exist. In order for you to remain competitive, you need to do everything possible to protect your business’ finances. Here are a few tips to help you do just that.
Have an emergency fund in place
For most businesses, their income is highly tied to the delivery of a product or service. As such, your income is most vulnerable during slower sales and market fluctuations. The benefits of having an emergency fund in place far outweigh the cons and will allow you room to be covered in the short term if something unpredictable comes up or if business is simply slow for a period of time. The bigger, the better, but at the very least, be sure to have a business checking account with enough funds to cover payroll for the next three months.
Create a sound relationship with a financial institution
It is imperative for business owners to have a working relationship with a bank that they can trust. Your financial institution is more than just a lender; they are trained to help you meet your business’ banking, lending, and cash management needs. Create a solid relationship with a bank that has demonstrated experience with businesses like yours and one that will be there through wind and weather.
Prioritise your business expenses
Prioritising business expenses is one of the most important aspects of protecting a business and its financial health. Some expenses are considered non-essential, which means they could be skipped if necessary. Others are considered essential, meaning they must be paid on a set schedule whether the business makes a profit or not.
You can easily determine and analyse your spending patterns so that you can make sure that your priorities are met first. This will help you to protect the integrity of your finances by keeping yourself from overspending.
Keep business and personal banking separate
It’s important that you keep your business banking separated from your personal finances for a wealth of reasons. For one, you don’t want to be getting your personal cash mixed up with your business spending, as this can leave a tricky financial situation for both your business and your personal life. It is also easier to keep business spending and expense in order when they are separated as well as many taxes and liability benefits.
Insure your business
Business insurance should be one of the first things that you are thinking about when you first start out. This is due to the way that your insurance can protect your business if, for some reason, you are the subject of a claim. This is vital to have from early on, as a claim at the start of your business could be enough to put you under and bankrupt your business before you even get a chance to properly start out.
Having the right financial plan in place can surely make a big difference in your business and your personal finances. Follow the tips above, and you won’t be just protecting your business’ finances – you’ll be growing them too.