The economy is in need of something – for small businesses to rebound. Before COVID-19, companies that had less than 499 employees accounted for almost half of the workforce in the private sector and drove much of the economic activity in the US.
Many companies, even financial brokerages, were hard hit by the pandemic and are struggling to not just come back but also to be stronger than they were before. Other businesses found that their services and goods were in high demand.
No matter how long a company has been in business, they all need the correct financial resources in order to ensure that they’ll be able to continue serving their customers, paying their employees using an online payroll service for small business, and remain dynamic members of the community at large. There are quite a few ways that small companies can utilize tax strategies and smart financing to increase their reserves of cash for them to grow and invest. Let’s take a quick look.
Cash Flow Management
One of the perennial problems faced by smaller companies is the flow of cash. In fact, the US Census Bureau conducted a Small Business Pulse Survey, which showed that less than 30% of the companies they surveyed had enough cash at hand to stay in operation for three months. That means that the flow of cash might be a top challenge. To cover shortfalls, many business owners might use personal funds or savings to support the business.
Proactive Tax Management
Taxes are another time and personnel-consuming issue for businesses of all sizes. Changing tax codes and their complexity are also worrisome for business owners. However, there might be a bit of help for that. As an example, the National Foundation for Credit Counseling says that changes put into place by the Tax Cuts and Jobs Act of 2017 might allow for accounting on a cash basis, or paying the IRS only on the income that was received.
Alternative Funding
In terms of external funding, many business owners might begin by seeking a loan from a bank. That said, they’re also seemingly increasingly open to options that are a bit newer. Some of them consider alternatives to traditional lenders, and this might have been given a boost by COVID-19. That is due to many fintech companies being approved for PPP loans.
One important step to this is to make sure your financial statement has been prepared. That should provide the lender with a formal record of the current status and financial activity of your company, as well as a picture of how you expect the business to perform in the coming years. These statements are a requirement for audits and can also be useful for investment, financing, and tax activities. Some options for alternative funding include things like crowdfunding, CDFIs, and more.
Insurance
You need to ensure that you’re protected financially in the event a client becomes injured while at your place of business. There are multiple types of insurance that should be considered for companies, depending on the overall nature of the business. These types of protection include general liability, professional and product liability, a business owner’s policy, home-based business insurance and commercial property coverage. These essentially create a package of coverage options that are common for small businesses.
Maintaining a handle on each of your options is critical in the event of a shortfall of cash. If you want your small company to be successful you need to monitor your flow of cash, proactively manage what you pay the IRS, stay up to date in terms of alternative options for funding, and ensure your company is protected from risk.
The post Financial Needs Small Businesses Should Address first appeared on Mind My Business.
