Pay close attention to your cash flow report. If you’re planning to start a business to fulfill a lifelong dream or to guard against a layoff here is some advice from Jackie David, accountant and principal of Your Back Office.
Having cash on hand is one of the biggest items to plan for, says Jackie. “Usually, you have to have cash to live off of, up to one year of cash if you have a choice.”
List all your potential expenses in areas related to operations, marketing, and memberships. Take into account membership fees in business organizations like the local chamber of commerce.
“It’s hard to predict all of your expenses. If you’re transitioning from being an employee, you may be familiar with costs, especially if it’s a similar industry.”
Someone who’s starting a business doesn’t have to venture out alone. Organizations like Service Corps of Retired Executives (SCORE) and local business incubators can offer help and provide valuable networking services. SCORE has free financial templates.
“Find a mentor who can guide you through what to expect in each month. If possible, work in the business a little bit to know what kind of costs you’re going to run into. The more planning you can do including income projections the better.”
You may also need to work a current job to pay immediate expenses while building the business for future income.
Jackie David, active on LinkedIn, serves small businesses in the greater Glendale and Pasadena areas. She has clients who are specialists like an antique dealer and clothing designer and those who are creative like web designers and owners of advertising agencies. Her clients have revenues of three million dollars a year and under.
For those who are starting out, she advises opening a bank account that’s separate from a personal account and then enter income and expenses for a couple of months without help from an accounting professional.
“A business owner should have basic knowledge of entering and tracking receipts and monthly bills. As volume in a business increases, then call in a bookkeeper or accountant to handle the weekly or monthly tracking.”
Jackie is willing to sit down with new business owners to help them get started properly, like a coach so the person knows how to handle the basics.
“Don’t worry about understanding the balance sheet,” says Jackie. “The most important report for a small business owner is the cash flow report. That’s the cash that comes in and then goes out to pay credit cards, utilities, and all other bills.”
Jackie advises new business owners to stop each week for about thirty minutes to one hour and enter expense information and income-no matter how few expenses there are at the beginning. Developing consistent habits in bookkeeping will keep the company organized and make handling information at tax time easier and less of a cause for concern.
For business owners wanting input on logos, read this Associated Content article logo design for small companies.