From the moment you start your company, the first 5 years is the crucial period for you new businesses to develop and grow market share. However, many new small businesses tumble within those first 5 years.

The following tips will help you get a firm footing with your new business.

Grasping the basics

First and foremost, you need to understand the basic accounting principles, so that you can keep track of your finances; the incoming and outgoing. There needs to be accurate records of your business transactions, and you do this by practicing proper bookkeeping. Thanks to modern technology, there are now apps/software to help you with your bookkeeping. They usually have a streamlined system of recording the transactions and will automatically calculate the totals and compile statements for you. However, having the knowledge of basic accounting principles is still important; so that you can detect any possible errors the apps/software could make if there’s a system update or glitch in the system.
 

Knowing your breakeven point

Find out what’s the minimum amount it would take to keep your business running. The best way to do this is to create a budget by listing all the expenses needed for the business. Then estimate the revenue you expect to make and see if it can cover those costs. This information will serve as a guide when you need to make financial decisions for the business. Having all these data at your fingertips will also help you spot any problems you may be facing, before it’s too late. For example, if your revenue is increasing but your profit is dropping, then perhaps you’ve exceeded your expenses. You’ll then need to find a solution to avoid the problem from persisting or worse, escalating.
 

Separating your business and personal funds

Creating separate bank accounts for your business and personal use may seem like a lot of work, but it will definitely be worth it and even spare you more headaches in the long run. This is because it’s easier to keep track of your business progress, income and cash on hand with a dedicated account for your business transactions. It can also prevent you from doing things like overspending and making tax return errors, by helping you avoid mixing up your personal and business finances.
 

Paying your taxes

The taxes you need to pay will depend on your business structure and the industry that you’re in. Among the different types of taxes that you may need to pay are sales and service tax, corporate tax and self-employment tax. What’s important is that you include your taxes in your expenses, to avoid any financial confusion. Then set aside the money needed and set up reminders on when you need to pay those taxes. This will help prevent penalties being imposed on you by the authorities.
 

Nurturing good relationships

Long-term relationships are extremely valuable when it comes to running businesses. This involves everyone from suppliers to vendors to service providers and of course customers themselves. When you foster a good relationship with them, then they would be more willing to work with you and you won’t have to go looking for new people to fill in for them every now and again. In fact, if you get close enough, you could even negotiate more favorable terms, be it with the supplier, vendor or service provider. As for the customers, you want them to keep returning to you and being willing to pay fair prices for what you offer.
 

Strategizing cash flow

You should learn how to manage influxes in cash. Don’t go overboard when there’s too much cash on hand and don’t panic when there’s too little. Track your cash flow so that you know when you have more cash on hand and when you have less. Consider putting extra cash into a savings or fixed deposit account to gain interest, which can then be used in times of need. Then time your expenses and schedule your sales accordingly. You could even use cash flow statements so that you can strategize the timing of your transactions effectively and efficiently.
 

Saving

Just like how you need a personal savings account, you would also need a business savings account, to prepare yourself for any unexpected circumstances. This could be for equipment or vehicle maintenance; or perhaps even to use when the prices of supplies suddenly go up, just to name a couple of instances. So, keep part of your earnings from your business into a dedicated savings account and this can act as a cash reserve to fall back on, instead of turning to banks for loans, which will in turn increase your debts.

In a nutshell, managing your finance should be your top concerns when you have new business. This is because new businesses will need bigger business models be it for purchasing material, outsourcing systems or even promoting your products and services.