Small businesses are generally set up by individuals or a group of people with a lot of passion and a lot of dedication and hard work goes behind the scenes. However remember no amount of hard work and dedication can replace the basic need to have an efficient financial system in place. All businesses whether big or small are run for profit and even if you do not break even right away you still need to know if you are heading in the right direction. A few finance basics for small business houses are discussed below:Meticulous Book KeepingMeticulous record keeping is the cornerstone of sound financial planning for any business and especially so for a small business. Small businesses houses may do the accounting in house and may not want to employ professionals in order to save cost but this can be lead to bigger troubles. Keeping record of all transactions big or small is a must and so is the need to keep personal transactions separate from business transactions. Proper book keeping, maintaining the right statements is essential to understand the finances of a business.Inventory ManagementManaging inventory well is crucial to the success of any business. You do not want to be burdened with excess inventory as holding it will incur cost but at the same time you do not want to land in a situation where you do not have enough to fulfill an order. Recording purchase dates, purchase price, selling price, selling date and keeping track of stock at all times will enable you to predict trends so that you can act as the per the predicted trend and have the required inventory at all times. Efficient inventory management can help in freeing up a lot of capital for day to day transactions.Keeping Track of CashCash transactions happen in all businesses be it big or small. In smaller scale operations using petty cash to pay for various expenses maybe more common. Recording of all cash transactions is important but equally important is to allocate it to the correct head so as to get a clear picture of the accounting.Get the Taxation RightWhile we are not fond of taxes yet there is no way we can go around them. Businesses have to pay more taxes then an individual would have to pay in his personal capacity. While the GST is trying to take care of it by bringing all taxes under one umbrella. Tax planning is important so that all taxes are paid on time in the required format with the requisite supporting documents. Tax deducted for employees also needs to paid on time under the required head.
Employees are the Most Valuable AssetEmployees are the most important yet often the most ignored asset. Retaining good employees is much more difficult than finding the right one in the first place. The right from the time of recruitment; an efficient payroll systems ensures that employees get their dues on time and accurately. Small businesses may find it difficult to have a complex salary disbursement software’s but often the solution may be to get into a tie-up with the bank where the salary accounts are held for employees and ensure timely credits. Recruitment process should also be professionally managed and the business must ensure that the employees get the required perks and benefits to keep them happy and committed to the businessReceivables and PayablesKeeping a track of what you owe vendors and what customers owe you at all times is very important. You need to our be sure of what you need to collect from your debtors and at what times and at the same time be ready to pay the creditors on time. Matching the flow of receivables with payables ensures proper cash flow, else one can find themselves in a tricky position. Recording the correct amount, due and receivable date, invoice details etc are important for proper follow up.
Small businesses get a lot of encouragement from government in form of tax breaks and special privileges; they can make use of them to enhance their operations. Getting the finances right can go a long in adding to the success of any business.