Business Finance Makeover: Shape Up Your Business Finances

If our business is going to achieve what we want it to achieve, it has to be fit. Not necessarily lean and mean, but strong and healthy enough to run efficiently and tackle new challenges. Our business finances are the underpinnings of our business’s strength; as they go, so goes the business.
Follow the steps in this business finance makeover, from separating your personal and business finances through financial statement analysis, to make sure that your business finances are in good shape.

Separate Your Personal and Business Finances

A business bank account is absolutely necessary for good business record management. If you haven’t done this already, you need to get a separate business bank account and make sure you use it only for business purposes. The cost of a business bank account is nothing compared to the time and trouble you might end up spending trying to unsnarl your books or figure out a paper trail if you were ever audited.

Prepare a Business Budget

I know, I know. They’re old-fashioned. But the thing about budgets, personal or business, is that they work. Put it, looking at it every day, consulting it, following it, and making adjustments.

Recognize that You Need an Accountant

An accountant’s main job is not doing the books, but providing you with the business and tax advice you need to manage and grow your business. So pick one and seek his/her guidance.

Analyze Your Financial Statements

For this financial statement analysis, the two financial statements you need are the Income Statement and the Balance Sheet. If you don’t already have these financial statements prepared, follow the links above to find templates you can use to prepare them.

First, examine your Income Statement. It shows you plainly whether or not your business has been profitable over the period of time the Income Statement covers. (If you haven’t been regularly generating an Income Statement, make a pledge to yourself that you will generate one at least every six months.

Established businesses normally produce an Income Statement each fiscal quarter.)

Second, use your business’s Balance Sheet and Income Statement to calculate the current ratio, total debt ratio and profit margin. Calculating these three ratios will let you see how your business is doing right now and diagnose potential problems.

Take Appropriate Action

Three common problems that this quick ratio analysis can reveal are:

  • Carrying too much debt
  • Carrying too much inventory
  • Problems collecting accounts receivable.

About the author: Diane H. Wong is a search engine optimization specialist and freelance team manager. Besides, she is a writer at the write my essay service so she prefers to spend her spare time working out marketing strategies. In this case, she has an opportunity to share her experience with others and keep up with advancing technologies.

Lavanya Rathnam

Lavanya Rathnam is an experienced technology, finance, and compliance writer. She combines her keen understanding of regulatory frameworks and industry best practices with exemplary writing skills to communicate complex concepts of Governance, Risk, and Compliance (GRC) in clear and accessible language. Lavanya specializes in creating informative and engaging content that educates and empowers readers to make informed decisions. She also works with different companies in the Web 3.0, blockchain, fintech, and EV industries to assess their products’ compliance with evolving regulations and standards.

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