Finding the right accounting firm or CFO during the initial stages of your small business development plan is a crucial step for many new business owners unfamiliar with the hoops and hurdles of business finances.
In addition to managing your balance sheets and assisting you in establishing a long-term financing strategy to guide your spending, accountants and CFOs can also offer insights into your broader position within the industry you’re breaking into.
This kind of comparative analysis can provide you with a means of evaluating your market impact relative to competitors and related nearby businesses.
Is it possible to set up a cash flow forecast?
As we’ve said in the past, your business’ cash flow is one of the core components that deserves monitoring with a microscope. Often misunderstood or overlooked completely, cash flow can quickly spell disaster for businesses that fail to account for shifts in expenses and significant drops in income.
Your accountant or CFO should be able to walk you through your projected financial expenses and establish tracking guidelines to make sure your income is balancing with the total outflow of cash. Keeping close tabs on your capital is especially essential for entrepreneurs just starting out.
Which business structure best suits my idea for the company?
There are three core business structures small businesses typically adhere to. A sole trader is the simplest of the three and involves a single person trading under their name or the name of their business. Although the business is trading through one person, the owner is still able to hire employees as the budget allows.
The biggest benefit to sole traders is the share of total profit. After taxes, all the profits fall to them as they maintain complete control over the business.
The risks involved with sole trading tie in with sole accountability. With the success of a business tied directly to your name, there is no safety net to fall back on if the business goes under. As a sole trader, you’re responsible for all funds owed by the business including bank and lender loans that are raised to establish yourself early on.
Partnership is similar to this concept with the added element of multiple traders. Instead of a single person being held liable for debts and liability, there are multiple people linked to a common account with any risks therefor spread thinner among each partner. This route naturally requires a great deal of trust on the part of the partners themselves.
When partnerships succeed, the wealth is shared in accordance of a mutual agreement among the parties involved. One of the major differences between partnerships and sole traders is a layer of administration needed to calculate and divide any profits or losses among the partners.
Limited liability companies enjoy the security of having their business liabilities tied to the share capital the owner hold in the company itself. This means the owner’s personal assets are not directly at risk, but often times personal investments need to be made to get the business up and running. A big perk of LLC’s is the extra veil of credibility others see in your business when looking to invest. Lower stakes can often mean more investor interest.
What kinds of financing options are available to me as a new business owner?
In the post-recession era, starting a business organically can mean potentially more wear and tear on your wallet. If you’re interested in raising more funds to grow your new business, accountants can help in a couple key ways:
• Loan application processes
If you’re looking to obtain a commercial loan, you’ll almost certainly need to submit a business plan. An account should be able to help you review your early numbers and prepare you for any statements required of you.
• Equity/debt financing
If you’re bringing in outside investors to help establish your business, or borrowing money from a bank or vendor, your accountant should be able to discuss whether or not seeking equity or debt financing would be advantageous to you.
If you’re looking for a reliable accounting or CFO service, contact our start-up accounting and CFO services experts.
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