Best Financial Practices for Small Businesses
Financial stability is something all small businesses need, but may also be the source of their greatest struggle. Here, the CPAs at Fitzpatrick, Leary & Szarko outline ways that small businesses can better create and preserve their finances through relationships with external sources.
Small business owners take massive financial risks when beginning their new ventures. Their reputation and the stability of their own personal finances rely heavily on their business’s success. As such, it is vital that small business owners carefully consider each financial decision they make to ensure sustainability. The following practices will put small business owners on solid financial footing by helping them develop strong relationships with their stakeholders.
Demand and practice honesty.
Many new business owners rely on outsourcing of contractors and other service providers for maintenance, accounting and funding. If you are a small business owner who is considering the hiring of a contractor for financial advising and accounting, it is important that you explicitly state the terms of your contract up front. You should also prepare a list of questions for each potential financial stakeholder. This can include inquiries regarding the schedule of fees or loan application requirements.
Be sure that you are able to speak with a direct contact who is familiar with your engagement to their company. Their availability and commitment to customer service will likely dictate their transparency when it is most important.
Assess your capacity for transparency.
From the moment a business begins, its finances and transactions should be documented. Prior to reaching out to sources of funding or hiring contractors, you should ensure that your business’s books are up to date and that proper accounting practices have been maintained. Both your business and the other investors or involved parties are taking a risk in entering an agreement. As such, both parties should feel confident in the other’s financial position.
Maintain financial accountability for loans, transactions and profits both prior to and during your business’s relationship with other stakeholders. Responsible financial practices will reflect well on you and your business, even if it suffers financial hardships at first.
Consider employing marketing tactics and tools.
If a business provides an excellent service or product, but has no strategy for promotion and growing its audience, stakeholders will lose confidence in its future success. It is therefore essential that new small businesses learn not only smart and efficient marketing strategies, but determine helpful ways of tracking the success of their marketing campaigns.
An important component of marketing for small businesses is reputation management. Create a strategy for managing and improving your business’s reputation through direct client and stakeholder interaction, deepening relationships with both in the process.
Make information security a top priority.
Security of client and business information is paramount to the longevity of any small business. Being so, businesses who look to other sources of capital or engage contractors in their day to day operations should hold these parties to a very high standard of security when it comes to their records. Prior to sharing sensitive information with outside parties, business owners should inquire as to the security protocols of the recipients.
Starting a business is a leap of faith that requires equal amounts of risk, drive and caution. Although maintaining a balance between these extremes is a challenge, small businesses that put in place smart financial and business practices such as those detailed above will be more likely to succeed in the short and long term.
For more information on starting a new business using sound financial practices, contact the CPAs at Fitzpatrick, Leary & Szarko today.
