Financial Health Check for Small Business Owners By Caroline Wetzel I


f you are a small business owner, you know that the decisions you make daily impact your bottom line. Are you


exercising the same care for your finances that you apply to the services you offer your clients? Following is a financial health check you can use to evaluate your finan- cial health as a small business owner.


Are You Focusing on The Big Picture? There are many pieces to a small busi-


ness owner’s total financial picture. Your financial plan, budget, and investments are three critical components to keep in mind no matter how busy daily operations become.


1. Financial Planning


Taxes can be one of the most significant expenses for business owners. In order to identify and follow the most appropriate tax planning strategies, small business owners need to be clear about both their business goals and personal financial goals.


Do you:


• Maintain a prioritized list of business and personal financial goals and refer to it when you need to make new decisions?


• Have a small business structure that offers you the most appropriate legal protections and benefits?


• Reduce or defer taxes and maximize available deductions and credits as advised by an accountant and financial planner? This may include timing income and expenses, using charitable gifting, and saving for retirement?


2. Budget Management 82% of all small businesses that fail


cite cash flow problems as the primary reason. One way to identify cash flow challenges before they become lethal is to manage a budget according to your busi- ness plan.


Do you:


• Know how much revenue you must generate to break even and cover expenses before profits?


• Monitor your income, expenses, inventory, credit, and cash regularly, adjusting and rebalancing where required so that you cover your fixed expenses and maintain funds in your cash reserve?


• Use your budget, break-even point, and cash flows over time to evaluate your business financing options and identify the ones that make most sense for you, when financing is required?


3. Investments


Many small business owners invest all of their time and money into their business. Do you:


• Maintain a cash cushion for both your personal finances and business needs, so that if you run into a cash flow crisis you have something to access?


• Save regularly and invest any cash inflows that exceed your current expenses and immediate lifestyle needs into an account outside of your business?


• Diversify your non-business investments across companies outside of your industry, in different geographies offering services that vary from yours?


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