The wrong financial moves can be disastrous for a small business owner. Small business owners must walk a fine line between keeping cash on hand, investing in their business, and investing in themselves. Take a few moments to learn four financial moves that small business owners need to make.
1. Take Out a Business Loan or Line of Credit
A lack of cash flow can be disastrous for any small business. Without cash, you cannot pay your vendors, employees, or operating expenses. Anticipate future cash shortages by taking out a business loan or line of credit before it occurs.
A line of credit lets you draw against it only when you need to. It acts as an emergency fund for your small business.
Another option is a business loan. When you take out a business loan, you don't have to spend it all at once. Instead you can save or invest a portion of it in secure investments until you need it.
If your business has debt that is at unfavorable interest rates, you can use a loan or line of credit to refinance it to a more attractive interest rate.
2. Purchase the Right Kind of Insurance Policies
It is necessary to own a few different types of insurance policies as a business owner.
The first is hazard and fire insurance for the physical site of your business. Should disaster strike, your insurance helps you cover the cost of repairs or rebuilding your business.
Another type of insurance to purchase is general liability insurance. General liability insurance protects your business from a number of claims, such as lawsuits from contractors that you employ.
3. Overhaul Your Accounting
Many small business owners make the mistake of doing the bare minimum when it comes to bookkeeping and accounting chores. However, it is essential to keep detailed financial records. Every expense and every sale must be properly recorded.
If you are financially savvy, you can purchase a bookkeeping program that helps you keep track of all your business's financials. Just make sure to actually use it. Even the best program is useless if you don't feed it the right information.
If keeping your own books feels too overwhelming, outsource the task to a bookkeeper or accountant.
4. Prepare for the Future
As a self employed individual, your strategy for saving for retirement varies from your average worker. Start by opening up a SIMPLE IRA. A SIMPLE IRA is a type of retirement savings vehicle intended for individuals who own small businesses with less than 100 people. The plan is easy to set up and fees are minimal.
Once you open your SIMPLE IRA, you can choose how you want to invest your contributions.
By following these simple moves, you are ensuring financial success for both yourself and your business.
Share14 October 2016
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