We’ve finally turned the corner on tax season and as a small business owner you may be thinking, if we made that much in sales last year, where did it all go? and How will we hang on until this year’s busy season is in full swing? If you’ve had thoughts like these you are certainly not alone. As if running a small business weren’t hard enough, seasonality makes it even tougher. Use the following advice from financial experts to help you plan ahead for the inevitable ebbs and flows of cash.
Avoid the Cash Flow Pitfalls
To start off, learn from your mistakes (and those of others) and get a map for the bumps in the road ahead. Nathan DauSchmidt, COO of Bankmybiz.com, highlights 7 opportunities seasonal small businesses should take advantage of to ease the strain of cyclical cash flow. Nathan says, “One of the only benefits of having a slow-season is that you have more time to work on business development.” Take this time to negotiate with vendors, plan ahead, try alternative funding methods and even “leverage your future revenue.” How? Read Nathan’s full blog post, “7 Cash Flow Pitfalls of Seasonal Businesses” to learn all 7 tips for staying afloat.
Get Comfortable with Financial Management Basics
Lou Davenport, a long-time SCORE mentor who’s helped hundreds of small business owners succeed through sound financial management, says, “By learning basic financial management skills, you can learn what the numbers mean, why they’re important, and what you should do about them.”
To investigate why last year’s revenues may have looked drastically different from last year’s profits, Lou says to keep tabs on the most important financial statistic: Gross Profit Margin as a Percentage of Sales. He explains why this metric is so critical: “1. Sales alone aren’t real money. You can’t pay expenses with them. 2. If the standard for your industry is 40% and you’re only at 30%, you have a serious problem. You’re either pricing poorly, making inaccurate cost estimates or working inefficiently.”
Gain even more of Lou’s firsthand knowledge on cash flow and financial analysis by reading his recent ExpertAnswers interview. And if you’ve been curious about how a SCORE mentor can help get your financial management in order, Lou also describes specific ways he and other mentors guide small businesses to success.
Strategize for Next Tax Season
Finally, though you’re just catching your breath from this tax season, it’s the perfect time to plan ahead for the next one.
Dominique Molina, President of the American Institute of Certified Tax Coaches, returned to SCORE this tax season to present her popular, info-packed webinar updated with info for 2014: “Instant Tax Relief – Last Minute Tax Strategies for Business Owners.” Listen in from the comfort of your headphones to learn tips to pay less business tax, including:
Taking advantage of home office deductions you don’t know about like an “on-premises employee athletic facility” (aka swimming pool)
Properly accounting for auto and healthcare expenses
Choosing the right business entity
Employing family members including young children
Cash flow can make or break your business; one of the most common reasons small businesses fail is because they run out of money. Keep your business on track, no matter the season, by knowing your financial status, planning ahead, and taking the experts’ advice. At the low cost of free, working with a SCORE mentor is a great way to accomplish all 3 of these tasks without spending a single dime.
Via: The Industry Word