New businesses fail for many reasons. Some are set up at the wrong time. Others suffer a bad break or lose market share to the competition. These things are often unavoidable.
What isn’t unavoidable are the steps you take to minimize your financial risk. With that in mind, let us look at three ways to do it.
Managing Your Accounts
A starting business usually has different types of accounts. The most common ones include a savings account, one or several accounts linked to a credit card, a checking account, and a merchant services account. For those unfamiliar with the last one, it means an account that allows you to receive both credit and debit card payments from your customers.
The important thing is not the number or type of accounts your organization decides on holding. What matters most is that you are clear on each one’s purpose, and you keep track of its movement. For example, if you have one merchant account for all online payments, it shouldn’t be used for physical transactions when your clients visit your store. In this case, you should have a separate one.
Yet, you can also have only one merchant services account for online and physical transactions if that is what you choose to do. Once again, the key is to fully understand the system you are trying to put in place. Not only will this help you keep track of your firm’s money, but it also makes processes like the filing of taxes much easier and less time-consuming.
Look, Listen, and Learn
If you are interested in the Certified Public Accountant Licensure Test, on average, you need to study for at least five years. Most people take even longer than that. The main reason is the extensive amount of detailed material you have to learn and use in a real-life environment.
This tells us several things. For one, it is a long process. You cannot simply go online and buy a fake CPA certificate. Even if you could, you would not go far once a company decides to hire your services. Second, as mentioned before, the amount of knowledge needed is vast. It’s not just about knowing how to add or a few standard accounting terms like profit, capital, and balance sheet.
Finally, this lets us know the importance of the job. A doctor will spend more than a decade to become a professional. It comes as no surprise as he is in charge of saving lives. An accountant is in charge of your company’s financial life, a job vital to an organization’s survival.
But that doesn’t mean you can’t ask questions, and you cannot learn. It is your responsibility as company head to be aware of your enterprise’s finances.
So let the accountant do his job, but learn as he does it. It will help your organization as a whole and provide you with essential skills for future endeavors.
You and Your Company
Even if you own the company or are the president or CEO, you can still be convicted of theft. In most cases, this is known as embezzlement or appropriating yourself with a firm’s assets for purposes other than what they were intended to be.
For new business owners, there is sometimes the temptation of “borrowing” money from your organization for personal reasons.
If your company is only yourself, there is nothing wrong with this. But it is very different when you are employing others, and their salaries are the basis of their livelihoods. These people are trusting you to pay them fairly and on time. They shouldn’t have to suffer the consequences of their boss’s mistakes.
Besides, if you were an employee, would you steal from the company that hired you? Even if you plan on doing so, wouldn’t you be afraid of what would happen if you get caught?
If you wouldn’t think about stealing from your employer, why would you do it from your own business? You are jeopardizing something that belongs to you. If the company goes bankrupt, you are the one who will lose the most.
If you are in financial need, borrow money from a bank or a reputable financial institution. Separate yourself from your own business. Keep your personal accounts detached from your corporate accounts. It will save you more than a few financial headaches in the future.
Starting a new business requires detailed planning, diligence, and resilience. It is especially true from a financial perspective. After all, your company’s money is its lifeline, the difference between surviving and going broke.
As such, manage your accounts well, hire a reliable accountant, and know the difference between you and your organization. By doing this, you will ensure your firm’s success.