Small Business Financial Management

For entrepreneurs, small business financial management is a vital aspect of growing a profitable company. Implementing sound economic principles and keeping a close watch on cash flow will help lay a solid financial foundation for the new venture. Monetary policies and procedures for effective cash management need to be part of the entrepreneur's business plan. Though it may be more exciting for the entrepreneur to dream about the actual services or products that the company will provide, a business cannot thrive, and may not survive, if the financing aspects are left to chance. The responsibility for developing monetary policies and procedures will depend on the size and structure of the venture. A sole proprietorship has one owner; a partnership has two or more owners; and a corporation is set up with a board and will issue shares of stock either privately or publicly. Setting up a corporation takes more time, effort, and expense than either of the other two options. The easiest, of course, is the sole proprietorship which only requires an individual with an idea. A partnership has the benefit of the resources and expertise of two or more people, but the principles must develop a partnership agreement that details each person's responsibilities. No matter the structure, someone needs to be responsible for the small business financial management. Even if this function is given to a bookkeeper or an accountant, an owner needs to know what is going on with the company finances.

By taking the time to develop a solid financial foundation for the company, the entrepreneur is demonstrating wisdom. "He is like a man which built an house, and digged deep, and laid the foundation on a rock: and when the flood arose, the stream beat vehemently upon that house, and could not shake it: for it was founded upon a rock" (Luke 6:48). Jesus told the parable of this man and another who was foolish enough to build his house on sand "against which the stream did beat vehemently, and immediately it fell; and the ruin of that house was great" (Luke 49b). Building a profitable business takes this same attention to detail when it comes to small business financial management. If the company ownership doesn't have the expertise or knowledge to develop a workable monetary policy, then that aspect needs to be learned or entrusted to someone with the skills or education to accomplish the task. Fortunately, there are many resources available for anyone who wants to know more about money management. Classes are offered at community colleges and small business development centers. Often chambers of commerce, economic development centers, and other organizations provide workshops and seminars. The major bookstores will have multiple books on most aspects of small business financial management. Online resources include multiple sites with practical information on financing issues. Other helpful tools include online calculators and software programs. Some software applications come with free trial periods so they can be tested to see how well the programs work with the particular needs of the company.
The ownership team (even if this consists of only a sole proprietor) has to know about budgets and working capital. Certain financial documents will have to be prepared and analyzed. Even if an accountant or bookkeeper prepare and analyze this information, the ownership team needs to be able to understand the documents or else the company's small business financial management is being left to others who will not have the same level of investment in the company's profitability and success as its founder(s). One important document is the profit and loss statement which shows income and expenses over a period of time. These are often prepared at least every quarter with a complete statement prepared annually. A balance sheet is similar, but it shows net worth or net loss at a fixed point in time. This document can be prepared on the last day of each month to show assets and liabilities. The difference is the company's net.

Another important aspect of small business financial management is the monitoring of working capital. Within working capital are several components that include such items as cash on hand, inventory, accounts receivables, and accounts payable. Cash on hand is the amount of money in various accounts. Inventory, the items the company sells, usually makes up a large percentage of a business's assets. Accounts receivable is the money that is owed the company by its customers. Finally, accounts payable is money the company owes to others, perhaps, vendors or wholesalers. Other components are included in working capital and the ownership team needs to know each one that affects the particular business. This way, the team can make good decisions about investments, purchases, extending credit, and taking on debt. Another aspect of small business financial management is payroll and taxes. These can be quite complicated, but here again, the ownership team needs at least a basic understanding of these issues and how the company's bottom line is affected by them.

A sole proprietor running an online business from his home may be able to get by with a spreadsheet and a calculator. But even he will need to watch cash flow, inventory, and profit/loss to be sure that his income exceeds his expenses. Three women forming a partnership to sell children's toys and books in a shopping mall kiosk will need additional financial tools, including a partnership agreement. At least one should have the skills and knowledge to oversee the small business financial management of the venture. A newly-formed corporation must name a treasurer and follow both federal and state laws for incorporating. Their financing will most likely be even more complicated. But no matter the size or structure, the important principle remains: build a solid economic foundation for a profitable, successful business that stands firm no matter how hard the storm rages.

Small Business Debt Consolidations

Small business debt consolidations can breathe new life into a small business effort that is dying under the crushing weight of indebtedness stemming from loans, temporary lulls in customer cycles, and inability to further invest for expansion. If a company is facing negative financial repercussions from indebtedness for whatever reason, a small business debt consolidation loan can help the owner get back on solid financial ground. These loans can assist any qualified owner restructure, reduce, and eventually eliminate indebtedness.

Many sources offer these types of loans to qualified owners, through competent lenders, who understand the particular needs of small businesses. Small business debt consolidation companies have consultants on staff who are up-to-date on legal and financial strategies. Considerations such as marketing, advertising, sales, vendor importance, and incoming capital earnings are just a few of the areas affecting smaller companies. State and federal legal implications are also a major consideration. Companies that offer this type of funding consider several financial areas before approving any loan. The incoming capital stream in exchange for the goods and services provided is important in the ability to make the monthly payments. A financial history of profits and losses will be requested for a proper analysis regarding small business debt consolidations. All assets such as equipment, buildings, and merchandise are also considered in calculating any loan.

Most owners prefer not to use personal collateral because of the risk to their family homes and other personal assets. The legal separation of personal assets and collateral in small business debt consolidation is an important issue for owners. It is wise for them to have made the legal distinctions between ownership of collateral before beginning a business venture. The legal complications can be stressful and may require legal counseling within the process of consolidation. The many financial and legal issues that face owners can be complicated without competent sources to help. Small business debt consolidations efforts can be effectively addressed through knowledgeable financial counselors. They can be a blessing to financially overburdened companies, so it is important that any owner seek out professional, competent counselors to receive free consultation. Choosing the right company to assist can be an early solution to later problems that may turn up if we neglect to act now. God says, "Call upon me in the day of trouble: I will deliver thee and thou shalt glorify me" (Psalm 50:15). We can manage our finances in a righteous way with God's help. Our first step in small business debt consolidation is to put our company's future in God's hands.

Credit and debt counseling can help consumers learn to manage their income, expenses, or debt more effectively. With help from an advisor, consumers will have the opportunity to realistically review their spending to create a budget that will allow them to live within the income of the household. This will also assist consumers on the subject of debt consolidation. Not all consumer counseling is beneficial, so it is important for the individual to be aware of the history of the organization before signing a contract or commitment.

Increasing debt is a national concern. Consumers are using credit cards to purchase items for daily living, which is causing the amount of average debt to rise per person in the United States. As a result, consumers are finding it more difficult to get out of debt and are crying out for help in stopping the vicious cycle of spending future earnings. Now, credit and debt counseling has become big business as new counseling agencies are springing up to rush to the aid of consumers. Most of these agencies will help consumers develop a budget, review their spending habits, and aid in consolidating their financial obligations.

Services offered by a counselor can aid a consumer with negotiating interest fees. A credit counselor will contact a consumer's creditors and negotiate with the credit card companies or bank lenders for lower interest rates, or in some cases for no interest rate at all, allowing the consumer to pay only on the principle balance. Also, in some cases, a credit and debt counseling service may be able to negotiate for a settlement or pay-off. With the services, counseling can be a major benefit, relieving the stress of collection agencies or the harassing phone calls of bill collectors.

Not all credit and debt counseling services are the same. There are for-profit counseling services and non-profit counseling services. Using a service that charges large fees for applications and large percentages in negotiations could cost the consumer even more in the long-term. Consumers should thoroughly investigate any agency that is under consideration. Ask to speak to other clients for referrals and ask about a 501(c3) non-profit government standing with the IRS. The Internet can be a good place to begin to gather information about potential agencies or organizations that offer assistance. Taking the time to pray to God for guidance can also be effective. "The effectual fervent prayer of a righteous man availeth much." (James 5:16)





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