As a new business owner, you’ve likely taken significant steps to protect your business from financial risk. You have:
- Set up an LLC, or other business structure,
- Drafted an operating agreement, and
- Even implemented employee benefits or other company perks.
But all that planning may not be enough to safeguard your finances and secure your business future.
Financial security as a new business owner extends beyond the walls of your company and includes many personal factors that many new entrepreneurs overlook when launching their companies.
To avoid frustrations down the road, commit to taking proactive steps now.
5 Tips to Improve Financial Security
1) Set up a business savings account
Anyone can open a savings account, and the requirements are similar across all states and banks.
When opening a savings account for your business, you'll need a license number, business registration, tax forms, and identification documents.
Having a business savings account is crucial as it helps businesses comply with taxation and business policies.
2) Ensure your business insurance is up to date
Startups face various risks and challenges that may result in claims and compensations. Setting up an insurance cover for your startup is an intelligent way to avoid paying claims from your pocket.
Many insurance firms offer different insurance covers different types of businesses: small and medium-sized businesses and large enterprises.
Depending on the size and nature of your business, you will need the right coverage that provides the best options for your business. The right coverage can protect your business assets and give you peace of mind.
Also, remember to keep your premiums updated to ensure smooth operations.
3) Clear your business debts
As a business owner, you’re likely to incur debts, either from raising startup capital or through pending bills. While debts may show the level of investments in a company, massive debts may eventually sink it. That's why settling business debts early is vital to financial security.
If you have business debt, hire the services of a consumer proposals expert like Harris & Partners to find the best solution to resolving your debts.
Consumer proposals are covered under the Bankruptcy Act and are a legal way to renegotiate debt while keeping your business afloat.
4) Understand your monthly expenses and net income
Business bookkeeping is crucial to settling financial security. Get a clear picture of monthly expenses and income, separate both, and know where every dollar goes.
That way, you can meet your tax payments, allocate operating funds, and keep profits. Don't mix personal funds or keep expenses unaccounted.
Sorting the basics of your business finance will create a strong foundation for improving financial security.
5) Create a financial safety net
A financial safety net is an essential addition to your business that provides a way out in emergencies.
A safety net in business refers to the funds explicitly saved for emergency one-off expenses such as minor repairs, production costs, and bills. This is different from an emergency business fund because it covers one-off expenses only.
The main advantage of a financial safety net is that you may not have to rely on government loans or use credit cards to settle unexpected bills, as those options have extra charges.