(Akiit.com) Starting your own business is an exciting prospect, but if you rush into it and don’t consider all the important factors, it can easily fail. Ensuring that your business is financially secure is the most important thing to prevent it from going under. There are various ways to do this, from making sure you have the right insurance to performing monthly checks.
Get the Right Insurance
Investing in the right insurance is one of the most important things you can do, as it will safeguard you against unexpected costs that crop up out of nowhere to damage your business. If you have employees, for example, you need to make sure you have workers compensation insurance. This protects the business in case of an accident or illness and means that these events won’t cost the company any money. General liability insurance is also important for companies that welcome customers.
Pay Attention to Overheads
When you look at your finances for the first few months, you may think the company has made more money than it really has. This will happen if you don’t take into account all the overhead costs which come with running the business. Be sure to write down any rent you may be paying, staff wages, supplies, insurance, and other general costs. Then deduct these from the monthly take to find the true profit margin. If you don’t do this, you may think that the business is doing better than it actually is.
Perform Monthly Checks
Some businesses wait until the end of the year to check their financial reports. However, this could result in disaster, as you may only realize your business is hemorrhaging money somewhere when it is too late. For this reason, it is advised that you carry out monthly finance checks at the end of every month. By doing this, you will see which areas of the business need improvement and which aspects are performing well.
Keep a Separate Business Account
One of the most basic pieces of advice for new business owners is to open a separate business account. If you mix up your business earnings with your personal income, there is potential for unexplained losses and discrepancies. It will also help to avoid any issues with tax. Small business owners may not see the need to open a brand new account for the company, but it is extremely important.
Rent Rather than Buy
When you are starting out, your business will have many overheads, and it may take some time for you to realize its full profit potential. If you need to operate out of a location, it is better to rent rather than buy in the early days. This way, if the business fails, you don’t stand to lose as much. It will also free up more funds for general operating costs.
Other ways to keep your business financially secure are to be frugal with your personal spending and only take as much as you need out of the company pot initially. You should also minimize travel expenses and be careful when expanding.
Staff Writer; Peter Ford