The entrepreneur can summon at least five small business financial management initiatives so as to be able to keep the venture's financial docket out of the woods.
These five lines of action are accounting & financial reporting, budgeting, the prompt collection of monies owed, risk management and insurance.
Adopting an effective and efficient accounting system is a much recommended way of achieving prudent small business financial management. Such a system makes it easy to identify, measure, record, and communicate financial information. Operating this accounting system on a daily basis makes for astute bookkeeping practices that will make the accountant's analysis of business data much easier and accurate. The accountant will be in a better position to prepare accurate financial reports and advise on the best systems for the business – all these on an informed platform thanks to his/her credentials.
Further, the use of a certified accountant in small business financial management goes a long way in lending credibility to the business venture, something that will always come in handy when the entrepreneur needs to deal with government agencies or lending institutions.
There are four options that can be considered in small business financial management i.e.:
- Where the entrepreneur decides to manage everything on his/her own
- The decision to hire someone to do in-house management
- Opting to keep business records in-house and having an accountant handle and prepare required financial reports like tax returns, and
- Going for an external bookkeeping service to handle all transactions and using an accountant handle the financial reports
Regardless of the option settled upon the entrepreneur will still need a record-keeping system, a financial plan and a budget, however basic these will be.
Small business cash flow management basically has to do with the initiatives adopted to implement a tighter control of cash. As indicated, these measures need not be so complex. In this case the entrepreneur can simply enforce the rule that no product/service will depart the business premises without an invoice. Henceforth the firm will only be required to make follow-ups on unpaid invoices. Other small business cash flow management initiatives can include the setting of billing policies, the use of policies like cash-on-delivery, retainers and deposits, and the offering of discounts upon prompt payment.
Effective cash flow management for the small business may also call for the adoption of several tactics like double entry bookkeeping, the use of pre-numbered documents, using bank accounts that demand for co-signatories, and keeping cash transactions to an absolute minimum.