As an entrepreneur, knowing how to protect your business finances is of the utmost importance when it comes to the longevity of your business venture. Staying on top of your finances is the most important job you have when you’re trying to get a new business off the ground.
Obviously, you need to focus on creating and manufacturing a great product, and then marketing it, but you won’t be able to do any of that stuff if you don’t have any money.
You will also need to be in a strong financial position if you are to consider growth in the future because you will not be able to source funding very easily if you have little to no cash flow and a mountain of debt.
Unfortunately, business finances are very fragile and there are a lot of things, both internal and external, that may threaten your financial position. It only takes a few small hurdles to force your business to close for good, which is why it’s important that you protect yourself. These are some of the best ways to protect your business finances.
Keep Track Of Spending
The biggest danger to your business finances is you. If you are not sensible about your spending and you start burning through money, you’ll run out before you know it and then you will have to find some funding in a rush if you want to keep the business afloat.
If you manage to spend all of your startup capital in the space of a few months, it’s not likely that you will get any funding because you have proven yourself to be very irresponsible with your finances, so the business will likely fail. If you’re going to succeed, it’s important that you learn how to handle business accounts properly and how to follow good practices from the very beginning. There’s no point deciding to be sensible with your money after you hit financial trouble because it may already be too late.
The most important thing that you need to do is keep track of everything that you spend, no matter how small. A lot of people make the mistake of tracking all the big expenses but they don’t think that the small stuff matters.
But over time, it adds up and you could be wasting a lot of money without realizing it. By tracking your spending closely, you give yourself a clear picture of the financial health of the business and you can spot any problems before it’s too late.
Separate Business And Personal Finances
Not keeping your business finances and your personal finances separate is a common mistake that a lot of new business owners make. It makes it so hard to keep track of your spending if you don’t keep the business entirely separate. It also means that you’re likely to start overspending and buying personal items with company money.
It usually starts off small, like buying lunch on the company credit card, but that’s the beginning of a slippery slope. Before you know it, the business is strapped for cash and you can’t work out why. It can easily creep up on you because you’re tracking all of your business spending and sticking to your budget, but you haven’t accounted for all the personal purchases that you made on top of that.
As soon as you start a business, you need to open a separate business account and make sure that you are strict with your spending. Even if it’s a tiny purchase, don’t mix your personal and business spending because once you start, you’ll carry on and your finances will get out of control.
Get The Right Insurance
Even if you are sensible with your money, there are still a lot of outside factors that could put your finances under threat. Lawsuits are more common than ever and there are plenty of people out there that are just looking for an opportunity to sue businesses and make some quick money.
If you end up in the midst of a lengthy legal battle and end up having to pay out compensation for some reason, it could cost you everything that you have and you will be forced to close the business.
The best way to protect yourself from lawsuits is to make sure that you’re following health and safety procedures properly because that is the most common reason for getting sued. You also need to ensure that all of your products are as advertised so you cannot be accused of misleading consumers, and make sure that you are following the correct procedure when getting rid of employees.
These are all things that you can do to avoid a lawsuit in the first place but, unfortunately, you can never avoid it completely.
In the event that you do get sued, you need to have protection in place so you don’t end up paying for everything out of your own pocket, and that’s where liability insurance comes in. On top of that, you will also need insurance on any office buildings that you own and any other assets that the business holds.
Get in touch with a company like Krywolt Commercial Insurance Brokers and they will be able to put together a comprehensive insurance package that covers all of your different needs. The right insurance will protect you in difficult situations and ensure that you don’t have to pay out large sums of your own money.
If you skip the insurance and you find yourself on the end of a lawsuit, you may have to spend everything that the business has, plus some of your own personal money as well.
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In addition to this, one must also not neglect the importance of alarm systems. These are necessary to protect company property when employees have left and there might be a lull in activity. You might want to consider some kind of Alarm system for commercial storefront and further ensure that the physical property of your business is also being taken care of!
Protect Yourself From Fraud
Fraud is one of the most common ways that businesses lose money, so it’s important that you protect yourself. There are a lot of different types of business fraud out there, so you always need to be on your guard.
Employee fraud, often known as embezzlement is the biggest danger for a lot of companies, especially as you start to grow and bring more employees on board. Employees may falsify their hours to get a higher paycheck or even write fake checks for themselves, and they may also take goods from the company and sell them.
Protecting against employee fraud can be difficult but it starts with the hiring process. Always be sure to do extensive background checks and if there is anything that concerns you in their past, it’s best not to hire that person. You should also split up financial duties so they are not handled by one person. This will make it more difficult for fraud to go unnoticed.
Customer fraud can be a problem as well. Customers may use counterfeit money or pay with bad credit cards, and if you run a physical store, they may also shoplift. But as long as you train employees in how to spot the signs of fraud and invest in security, you can avoid most instances of this.
You should also pay particular attention to your online security because people may be able to steal your identity and take funds from the business that way. This is becoming far more common than other types of fraud and it’s one of the biggest dangers to all businesses right now.
The most important way to protect yourself online is to simply invest more money in your security. Make sure that you’re paying for the best security software and you have a well-staffed IT department that can monitor your systems for a breach and keep everything well maintained.
You should also dedicate some time to training employees so they know how to spot malicious emails, send documents securely, and create strong passwords on all of their devices. Sometimes, a data breach can come from within, so make sure that you know exactly who has access to sensitive documents and what they are using them for.
Protect Your Cash
People tend to assume that cash is dying out and most transactions are done electronically, but in reality, around 30 percent of business transactions are still made using cash. If your business carries a lot of cash, you need to take steps to protect it.
It’s a lot easier for an employee to pocket some cash than it is for them to steal money electronically. There is also the danger of employees being robbed when they are taking cash to the bank. This is a crucial step when it comes to looking at how you protect your business finances.
In order to protect your cash, you need to ensure that everything is recorded properly and cash is counted up by multiple people, so you can easily see if there are any discrepancies in the amount reported. When it comes time to deposit the cash in the bank, it is best to pay an outside company that will collect the cash and transport it via armored car to the bank on your behalf.
It’s an extra cost to bear but it’s a lot cheaper than losing a huge amount of cash because you sent an employee out on their own and the money was stolen.
If you are not taking these steps to protect your business finances, you could find yourself in a difficult position and you may be forced to close the business entirely.
Images courtesy of Pixabay.
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