Best Practices When Starting a New Business: Part 2 of 3admin
The last post, we discussed keeping your business and personal accounts separate as well as ensuring you have integrated accounting into your business practice. This time we are going to continue moving through some key steps to starting a successful business by discussing the basics and making sure they are understood and managing your cash flow.
- Understanding the basics.
- Once the integration is understood and practiced, know what the numbers mean. Learn to understand what your records are telling you.
- This will help you identify how timely your customers are paying, if the business will show a profit or loss, and if your business is providing positive or negative cash flow.
- Understanding this will allow you to make better real-time decisions for your business.
- This assists you in identifying symptoms that are ultimately indicators of larger problems that may currently be happening or on the horizon.
- Managing your cash flow.
- Net income (profit) does NOT mean there is cash available to pay the bills.
- Understanding the timing of when customers pay – i.e. how long it takes, whether it is 60 day versus 30 days. Knowing how long it takes for you to collect from your customers will help you better understand the extent and role your line of credit will play in ensuring there are funds available to pay the bills.
Remember, there are many ways to ensure that a business starts up successfully and continues to run successfully. These steps discussed are what we believe are some of the most important ones to keep in mind and strive to follow. Stay tuned in the coming weeks for the final post!
Please contact us at Frankel Zacharia if you have any questions or would like more information.
Scott Weaver, CPA