Managing Your Business
Many entrepreneurs are excited by the idea of working for themselves — the hesitation comes in when they contemplate the administration end of the bargain: paying bills, employees and vendors and complying with regulations. It's true that if these tasks are not accomplished, a business won't stay in business for long, so new business owners should consider everything that goes into running a business before they make the jump into business.
Paying the Bills
Business start-up expenses can require investing back into the business any profit gained from sales of products or services, possibly for a long time. While businesses are establishing themselves, owners need to build relationships with vendors. These relationships can help business owners during lean times if they need to ask for flexibility on payment.
Business owners also need to consider payroll. Business start-ups may require a certain number of employees immediately in order to fulfill demand for products or services. Owners must be able to pay employees or be able to convince employees to accept alternative forms of compensation such as deferred compensation plans, stock options or salary increases after performance reviews. A new business may also consider hiring part-time workers to decrease the cost of benefits and payroll.
Paying Taxes
Business owners should also be prepared to account for sales tax and other taxes incurred. Depending on the business entity, businesses will be taxed in different manners. Business owners should be aware of their tax obligations and may want to hire a small-business accountant to ensure compliance with federal and state tax laws.
Managing Cash Flow
What business management boils down to, however, is managing cash flow. Business owners must be able to realistically estimate when money will arrive in the coffers to meet payroll, pay vendors and the government, and answer other business obligations. For this, business owners must rely on cash flow projections; businesses must estimate when customers will actually pay for products or services, also known as receivables. Based on invoices, business owners can also predict with some accuracy when they must pay vendors, also known as payables.
Some other considerations to account for in a cash flow projection are moneys owed on improvements, principal and interest due and annual fluctuations in sales. In fact, diligent accounting may require line items for the following: rent, utilities, inventory, wages, taxes, benefits, debt payments, advertising, equipment and any other expenses typically owed by the business.
In essence, a cash flow projection attempts to ensure that sufficient money will be available to cover each bill as it comes due. Good management may require discipline in payments following the cash flow projections. For example, prioritizing payment of one larger bill that comes due before a few smaller bills may be necessary. Cash flow projections can also highlight repayment problems well in advance, so that a business owner may have time to improve the situation or negotiate with vendors.
While many business owners may be tempted to ignore the financial management side of a business, preferring to focus on ideas and innovation instead, these business owners put their businesses at risk. Others may rationalize that paying a business attorney is too costly in the beginning. But good advice and analysis from an attorney and an accountant as well as proactive financial management could save a business in the long run.
Preparing to Meet With Your Business Law Attorney
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Preparing to Meet With Your Business Law Attorney
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