The basics of business finance

Most business owners are probably aware that the majority of small businesses don't survive the first year.The reason for this is typically poor decisions in the area of business finance.If you are a small business owner, you certainly want to be one of the businesses that make it.Help yourself succeed by learning all you can about the basics of business finance.The basics can be broken into three manageable areas, financing the start-up, budgeting and account tracking, and advertisement and expansion.Hopefully this article will help you make sound decisions in these areas.

Financing the start-up-unless you are extremely wealthy, you won't have the money to start your business without help from investors.This is often a place where budding entrepreneurs go awry.You are going to have to find investors but not every person or institution willing to lend you money is a good match.If you are just starting out, you should try to raise "patient capital" for your business.This means finding funding sources that aren't going to expect an immediate return for their investment.Draw up terms that are reasonable for both you and your investors but don't make financial promises that you won't be able to keep.

Another idea when you are generating start-up funds is to use a finance company.We usually go straight to the bank when we need to borrow money but in the case of a small business loan, it might be a better idea to use a finance company that specializes in small business loans.You will find that the longer leases and flexible payment plans offered by finance companies are easier to work with than the terms offered by a bank.

Budgeting and account tracking-once you have the start-up money and you delve into the business, there will be more finance decisions.It is optimal to hire an accountant or a financial planner to help manage the operating finances.However, most small businesses don't have the resources (yet) to hire professionals.The second best thing to do is to get some bookkeeping software.By using the bookkeeping software, you will be able to track day-to-day expenses.This is important as you need to get a grip on your money and you need to learn how to make a realistic budget.Another thing that bookkeeping software will enable you to do is keep track of accounts payable and accounts receivable.Making your payments on time will help you get out of debt faster and will also help you build a good reputation.Insisting on timely payments to you will also help you succeed in business.

Advertisement and expansion-once you have a cash flow you will need to focus on reinvesting that money into growing your company.It is often stated that half of your revenue should be reinvested into advertisement and marketing.Once you reach this plateau in your business endeavor, you should definitely consider investing in some professional help.If you have a positive cash flow, you will need an accountant to help you with the taxes and financial planners to help you with investments.

You will need good advice when you are trying to determine if expansion is possible and if it will be lucrative.You will also need advice when you are deciding on advertising mediums and marketing audiences.

In general, try to keep your short and your long-term goals realistic.Keep an eye on your cash flow and address problems as soon as they arise.Get out of your high interest loans as quickly as you can and maintain a good reputation in the field as a good investment.