Working with a family member is challenging enough without the added stress of managing finances together. However, if you’re running a family business, being able to successfully juggle invoices is vital in the success of the company. Sometimes, if one member of the business is better with numerical tasks, it makes sense to assign him or her the role of managing the company’s accounting. This can easily be done with various accounting software programs. Another option is to hire a certified accountant for payroll, preparing tax returns, applying for and extending credit, and other financial tasks.
Tips to Manage Your Business Credit
While it takes time to build a credit history as a new family-owned business, consider it a worthy investment. It is much easier to build your credit history than it is to repair it. Even if creditors are only willing to extend your company small loan amounts at first, make sure that you pay them in full and on-time. A solid payment history is the single best indicator of your company’s financial credibility.
When signing up for commercial electricity, buying a new office computer, or signing a contract for lawn maintenance, make sure that you do it with the name of your business and not your personal name. Not only does this keep your business and personal financial information separate, it also helps you and your family members establish a credit history for the business more quickly. When you are approved for a business loan or line of credit, don’t accept more than you actually need. Taking on too much before you’re financially established is risky, and often ends in disaster.
According to Blue Collar Software, a provider of easy to use software solutions, after you have been in business for several months, request a copy of your company’s credit report to ensure that it is accurate. You should continue to do this at least once a year for as long as you own the business. Similar to your personal credit report, each company listed in a financial database is given a numerical rating that demonstrates credit worthiness to other businesses. The one major difference between the two report types is that businesses are rated on up to 150 different factors while individuals are only rated on six.
Estimate Your Company’s Cash Flow
One key to success as a family business is having a good understanding of your company’s cash flow. This is the amount of money that is left over after you deduct expenses from your generated revenue. Unfortunately, figuring out this amount is not as straightforward as it might seem. Revenue and expenses change constantly and rarely do so at the same time. One month your revenue may be higher than normal because you received payment for several overdue invoices. The next you may have limited revenue and large expenses because you had to replace a company vehicle.
An easy way to monitor and predict cash flow is to invest in affordable accounting software. The program you choose should have easily navigated dashboard and full service integration in order to easily pay bills, print invoices, and create business reports. Having a solid financial foundation can help to ensure the long-term success of your company.