Give Your Business a Financial Checkup

Three tips for keeping your business finances healthy

6/12/2019 10:00:00 AM
One of the main tasks of a business owner is to make sure your company’s finances are in order. However, with all the variables and potentially hectic day-to-day activities that come with running a business, it can be hard to find the time or even the mental space to ensure you’re not wasting money. However, by using good financial strategies, you can lower your operating expenses and increase your bottom line.

Don’t mix business and personal finances

Give Your Business a Financial CheckupOne of the best ways to keep your business finances easy to work with is to never mix them with personal finances. Even when money gets tight, it’s better not to dip into personal funds, as it will likely create even bigger problems later on, such as personal liability and tax issues or complicated accounting records.

“The best way to maintain clear separation of your expenses is to set a personal budget and a business budget,” Alyssa Gregory advises in an article for The Balance Small Business. “Adhere to them strictly and separately…Your bookkeeper and accountant will thank you for not muddying the money waters when it comes time to manage your books and pay your taxes.”

Balance debt and equity

One of the most common dilemmas facing business owners seeking to raise funds is the choice between debt and equity. If you tend to avoid risk, it might seem like a good idea to raise funds by giving up equity. However, this can dilute your stake in the company and potentially hurt you in the long term, while debt can be repaid and helps you retain control over the business.
In a February 2019 article for Entrepreneur, Anand Srinivasan, founder of the Hubbion project management tool for small and medium businesses, says that “if you are a startup or a small business with an established revenue stream and a steady cash flow, there is no reason why you should choose equity over debt.”
However, he does warn that “there is a limit to how much debt a business can take.” Because market forces can unpredictably affect your business income, it’s a good idea to only take debt you can pay back even if your income stream dries out for a month or two. “A good business owner knows to maintain a fair balance between money raised through debt and cash infused through the sale of equity.”

Review expenses quarterly

One of the easiest ways to let money slip through the cracks is to passively allow things to remain the way they have always been. Every quarter, set aside time to review your expenses and identify areas where you can save money. For example, if you were able to offer overtime to employees during busy times, let them know that overtime will be stopped when the business cycle has slowed down.
Employees will continue to take overtime if you are willing to pay it, even if there is little work to do. Additionally, you should try to make sure you are not double spending on anything, like paying a premium for an employee’s health insurance plan when they are already covered through their spouse.
Profit margins can be very thin. Educating yourself on business finances, trimming unnecessary expenses, and maintaining healthy financial practices can be the difference between ending the year in the red or in the black.
Remember, we are here to help you. North Shore Bank is a relationship-based community bank, deeply invested in our service areas. As a local mutual savings bank, we understand the current environment and can provide you with services and guidance for growth. We welcome any questions you may have about your business finances and welcome the opportunity to help find solutions to your business needs. It’s what sets us apart and how you can take advantage of a partnership with us. Connect with your North Shore Bank Business Banker who is happy to assist you in meeting your business goals.