Small business financial checklist for starting your business

Apr 05, 2024

There is nothing more exhilarating than starting your own business. One thing that’s given more importance but also gets neglected eventually is business financial planning. For this very reason, businesses get shut down before they could flourish.

Financial requirements for starting a business appear huge at first but once the owners get into planning and execution, finance management takes the backseat.

Managing small business finances requires sound financial habits, accurate tracking of even small expenses, reliable backup funding contribution, and mapping goals rightly with the relevant budget.

What does it take to make small business finance management exemplary?

Importance of planning your finances before starting a new business?

Having great ideas isn’t enough to kickstart your business operations. Even businesses getting adequate financial assistance from the beginning fail as they don’t focus on strategic business financial planning.

Here are some of the reasons why you should be careful with money management during the early stages of your business.

You will be spending more around the start. If you exhaust your financial resources, you will have to put things on hold till you obtain funding.

Not keeping track of finances for small businesses can have prolonged effects on your financial health and the snowball effect of this will impact your cash flow. On the flip side, planned financial management tells you what expenses are necessary and what should be avoided.

The road ahead is full of uncertainties and pitfalls. If you don’t nail your small business finance management, it will take longer to get out of these blows.

The financial planning for small businesses can also act as guidance to determine the goal sprints, draw activity timelines, and when to make major decisions.

When you are managing small business finances efficiently, you can tell if it’s progress or a downfall at the end of a season.

Business financial planning gives the privilege to the owners to prioritize the important tasks even if they are higher on expenditure.

Whether you are getting a business loan or searching for investors, you will be asked about your finance requirements and planning for the next couple of years. It can be impossible to get funded without understanding the worth and financial fundamentals of your business.

Fake it till you make it doesn’t apply to startup owners. Eventually, they will be pushed out of the competition by their better alternatives. It takes impeccable financial planning for small businesses to make it beyond the testing phase and start yielding profit.

Financial steps to take when starting a small business

If you are in the inception stage and exploring financial requirements to start a business, follow these steps to know your options and how to be prepared to face budgetary challenges.

1. Get a good idea of the laws and regulations

Certain businesses require licenses to operate and that applies to owning or leasing a property or selling a specific product too. Approach an attorney and get ready to learn your local legal requirements and regulations that your business should adhere to.

These laws change from time to time and they vary from country to country or even from one city to another. You can also drop by any concerned local government office to get more updated information.

2. Understand your financial goals

Set realistic and quantifiable financial goals that you plan to achieve and not something vague like ‘I want to become a millionaire.

Draw a timeline of where you want to reach monetarily in the next few years and whether you want to scale your business. If yes, then when and how exactly do your financial goals vary when you decide to grow?

3. Open a separate business account

For keeping track of finances for small businesses and better small business financial management, having a business account is mandatory. Taking this step isolates your personal spending from business expenses.

Banks provide many tempting schemes for small businesses to open their accounts with them. Research and create your account to hold your business reserves and amass revenue. A business account is also needed for taxation purposes.

4. Determine the insurance plan for your business

An insurance cover protects your business assets against losses and attacks. There are many types of insurance depending on the type of valuables it covers.

To mention a few, general liability insurance, professional liability insurance, commercial property insurance, and so on. Based on your industry and business nature, you will have to ensure your assets receive coverage if any damage occurs to them.

There are insurance agents who can throw light on this and find you the best plan with a reasonable premium and high coverage.

5. Determine how you’ll fund your business

New businesses often start with planning the financial requirements to start a business. Additional funding is necessary to grow further and not burn all your savings. Funding can come from any place.

You can borrow from your family or friends, get a business loan, or get help from VCs or startup accelerator programs. In any way, financial planning for small businesses can commence only with a reliable funding source.

Depending on the funding source, the returns vary. You might have to repay the money you borrowed with interest or pay a share or equity. Choose what aligns best with your financial goals.

6. Create an emergency fund

Every business has its good and bad days. When you make the most on good days, put a part of it aside to bolster the days when you fall short.

This reserve is called an emergency fund that is extremely important in financial planning for small businesses. The emergency fund can be three to six months of your revenue put together to break when you run short or out of cash completely.

Experts advise keeping the emergency fund as liquid reserves that can be easily accessed and not tied up with any obligation.

7. Be prepared for taxes

Taxes can be a huge shock to small businesses when they start seeing profits. There are other taxes like payroll, and local and state taxes.

Business owners can easily forget their first taxation period as they are engrossed in managing small business finances. But leaving out this liability when you assess small business financial management can create a huge difference in the profit margin you expect.

Besides, the first taxation period can be quite hectic. Planning quarterly taxation can simmer down the stress and give you clarity about your financial disposition.

8. Invest in a corporate credit card

While you can bolster your huge investments through funding, there are many small but key financial requirements that cannot be ignored. Having a frequent backup source of funds is possible when you obtain a corporate credit card.

You can enjoy many perks and rewards while using them as well as introductory offers and discounted annual fees. As you are still new, lenders will need a conviction that you will repay on time.

A credit card can help you build a positive credit record which in turn can convince the lenders.

9. Build a business expense policy

Get in touch with a financial advisor and build your expense policy. This business policy should talk about the allowed expense limits of each category.

It should act as guidelines on what’s appropriate spending and what is its approvable limit. This way your accounting team will not shoot questions to your finance managers every time they have to process an expense.

A clear business expense policy deals with categories and budgets of T&E expenses that is explicitly let known to employees.

10. Set up a bookkeeping system

You have set up your business now and have an accounting system that continues to churn out invoices to customers and payments to vendor.

This is the time to invest in bookkeeping software for keeping track of small business finances for small businesses. Cloud-based, automated accounting software is what you need to take charge of your financial requirement and avoid unnecessary expenses.

By investing in this, you are also keeping your accounting team’s strength low.

Set your business finances on track with Volopay

When you are in the early stage and trying to assess financial requirements for starting a business, you would have made monthly and annual estimations.

This estimation will be a far cry from your actual expense spreadsheet when you start out. Before you know you are neck-deep into the process of looking for financial assistance.

One smart way to avoid this is implementing a spend management application as a part of your small business financial management. Volopay can be that partner to help you in keeping track of your small business finances.

Pay your local and international vendors through the bill pay software, be able to create and assign n-number of virtual cards to make online payments, reduce your employees’ burden by providing an efficient reimbursement system, and do much more with Volopay.

Volopay’s cards can be also distributed to your employees and departments to handle their one-time and recurring business expenses automatically.

Track how your financial planning for small business works with real-time accounting data on Volopay. 

Have complete control over your budgets and spends