Women may have had a slower start with starting and running their own businesses, a lot has changed over the years. Today, not only are they doing what they love, they are equal partners in financial planning.
Neha Srinivasan, vice president – finance, Reliance Industries, provides us with valuable information for women who own small businesses. Read on to know more:
When setting up a business, what are the important aspects women need to educate themselves on when it comes to finances?
An empowered female entrepreneur builds her success with strong business foundations. Being knowledgeable and proactive about the concepts that worry you, including finances, will significantly help your business. Having a basic understanding of finances is fundamental for any small business, but practicing financial skills is a surer way of succeeding in a competitive business market. Some of the aspects that need to be taken care of are finding the right insurance, consider superannuation, set detailed financial goals, avoid bank fees, budget effectively, and seek advice.
What are some of the simple account tasks a small business owner should be well-versed with?
When it comes to managing the books for your small business, timeliness and accuracy is key. One of the best things you can do is to come up with a schedule to help you stay on track with the accounting tasks that need to be completed to keep your business up and running. The tasks with which need to be well versed in are recording transactions, filing receipts, reviewing vendor invoices, managing payroll, sending invoices to the clients, and forecasting the cash flows.
How can a women business owner track the financial information for her company?
When starting out a small business, women entrepreneurs may find it confusing to determine which reports are important and how to read these financial reports. There are three basic reports that a small business requires to keep track of its finances—the balance sheet, the income statement, and the cash flow statement. The cash flow statement is arguably the most important of a small business’ financial reports. This report essentially indicates if the business is generating cash, or not.
Is it important for a business owner to take a monthly salary considering the business is self-owned? Please explain how or why this can help or hamper the financial stability of the company.
The business owner should take a monthly salary as it is an added incentive as the same money can be used to increase savings for the individual or the business on a steady basis. The owner can decide on a small amount initially and then increase it as the business expands. This will not hamper the business as well as the individual.
Naturally, it’s important to set aside money for the financial growth of the company. How much should be set aside as investments for growth?
It is advisable to reinvest the profits on a regular basis rather than investing a lump sum amount if the business yields more return as compared to other investments. Ideally 25-30 per cent of the profits should be invested in the business again. However, depending on the business that you are into, this percentage can be altered based on various factors specific to the business.
Are there specific insurance plans to safeguard a company’s interests and help it grow financially?
There are various insurance plans to safeguard a company’s interests like Property insurance, Workers’ compensation insurance, Vehicle insurance, business interruption insurance etc. While doing business, liabilities may arise due to sudden reasons and can have a huge financial impact on the business, insurance plans against such dangers can help a company tackle financial burdens.
What are some important financial processes a small business should set in place?
A business bank account, creating a budget, establishing an accounting system, reviewing your accounts, procedures for providing credit and collecting outstanding debts.
What about tax benefits that a company can look into? Please elaborate on a few rules to follow.
Tax benefits can come in a wide range of forms and may be known by a variety of names. Tax deductions, credits, and exclusions are benefits that reduce the amount taxpayers owe annually. The tax benefits vary depending on the revenue, profit earned, expenses incurred along with types of revenue, expenditures.
How can a small business owner plan ahead when it comes to finances? Please elaborate with examples.
For planning ahead, small business owner should think of future income to be achieved and what expenses will be incurred. Taking this as the base, the cash flows should also be considered as how much money will be flowing in and how much will be flowing out of the business in that period. The small business owner should also take care of uncertain liabilities which might not be covered under insurance and can have a significant impact on the business.
Can you explain what good/smart financial habits entail when it comes to managing a business?
Smart financial habits involve planning your finances in a way as to setting your financial goals for the business and drawing a roadmap to achieve those goals. Financial habits to be set for a business include devising clear financial goals for the business, creating a budget and using it to guide the spending, building an emergency fund to protect the assets, and paying off the liabilities well in time, to name a few.