A Guide on How to Improve Your Small Business Financial Health

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A GUIDE ON HOW TO IMPROVE SMALL
BUSINESSFINANCIAL HEALTH
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ITS NOT JUST ABOUT SALES
The financial health of a small business is more
than just about making sales. There are other
strong aspects and challenges of a successful
business like proper management of cash flow and
keeping your business on solid financial footing.
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WHY BUSINESSES FAILS
50
Unluckily, almost 50 of all small
businesses fail within their first few years of
operations because they were unable to manage
their financial health.
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FINANCE MANAGEMENT
MONITOR
And when it comes to manage your businesss
finances, its time to monitor and manage your
financial health.
MANAGE
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WHAT TO MANAGE?
Cushion in your bank account
Keeping proper accounts
Staying familiar with your payables and
receivables
All these activities help in sound management of
your business financial health.
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UNDERSTANDING KEY METRICS
A sound management of financial health doesnt
mean a business owner have to be an accountant,
instead the success starts with understanding few
key metrics that constitutes the overall
financial health of your small business. 
THESE METRICS WILL HELP YOU UNDERSTAND YOUR
BUSINESS FINANCIAL HEALTH BETTER AND IF YOU
UNABLE TO UNDERSTAND THEM, SPEAK TO YOUR
ACCOUNTANT OR OTHER TRUSTED FINANCIAL ADVISER.
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KEY METRICS
BUSINESS CASH FLOW
BUSINESS REVENUE
BUSINESS EXPENSES
Theres an old saying that cash is king and
this means cash flow is the blood that keeps the
heart of the your business kingdom pumping. Cash
flow is the third most critical component of
success for your small business. Without it,
profits are meaningless and achieving a positive
cash flow does not come by chance.
The second important metric is the cost of
running and managing your small business. It
involves the cost of goods sold as well as the
overhead costs related with your business. These
costs include utilities bills, wage,
subscriptions, insurances, equipment and
supplies, rent, lease, electricity etc.
Revenue is the chief metric that needs your full
attention because a business without it just
wont last long. You need to monitor the daily
income along with keeping track it on weekly,
monthly, quarterly, and annually.
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KEY METRICS
ACCOUNTS RECEIVABLE
ACCOUNTS PAYABLE
Being an essential element of a businesss cash
flow, accounts receivables also effect several
areas of accounting including accounts payable,
financial statements, budgeting and collections.
Understanding the impact can aid in the direction
on making decisions on your credit and
collections policies. The habit of collecting
late invoices from customers will become more
challenging and difficult as the time passes.
Accounts payable are your companys unpaid bills
and can have a big impact on the profitability.
Staying on top of your Accounts Payable is
important since they provide an opportunity to
benefit from the quick payment terms since many
suppliers offer discount benefits to customers
who pay their invoices quickly.
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USE ACCOUNTANT TO IMPROVE FINANCIAL HEALTH
Leverage your accountant perspective and insights
can help improve your business financial health.
The accountant reviews your business from a
little different perspective, and leveraging it
can help increase your profit potential.
Consider regular meetings with your accountant
to review your financial report and look for
areas that need improvements or tweaking and use
that information to leverage opportunities to
save money or increase profit potential.
You dont have to be an accountant to run a
successful business, but most successful
entrepreneurs understands their financial data
and they use that information to make informed
business decisions.
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AUTOMATE ACCOUNTING PROCESSES
Automating your accounting processes will not
help make accounting and bookkeeping much
simpler, but also enable your accountant to
access your financial data remotely and easier
to file tax returns, and year-end financial
statements.
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5 KEY QUESTIONS TO CHECK YOUR FINANCIAL HEALTH
Before you start evaluating your business
financial health, there are few key questions you
should ask to determine whether your business is
in sound financial health.
Is your business steadily generating net profit?
Can your business ensure unanticipated dips and
change?
Is your business meeting financial obligations?
How does your small business measure success?
Could your small business fund growth using debt
financing and cash from earnings?
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10 FINANCIAL HEALTH STRATEGIES FOR BUSINESS OWNERS
Here are ten financial health strategies you can
deploy to improve your small business finances.
Know your numbers.
Pay your bills on time.
Fulfill your financial obligations properly.
Keep separate accounts for business and personal.
Track expenses in real-time.
Improve your business credit.
Lower your cost of operations.
Support staff by focusing on their well-being.
Create a business emergency fund.
Last but not the least take care of yourself.
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IS YOUR SMALL BUSINESS IN GOOD FINANCIAL HEALTH?
Running and managing a successful business isnt
really a rocket science, it only require
determination and regimen as an entrepreneur to
figure out whats happening in your small
business financials.
You might need some time and effort to learn a
few additional skills, but these tips will surely
a great start to have a better understanding of
how your business is doing financially.
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