No matter whether your company is just getting off the ground or has already established itself, access to enough cash is critical to its operations. Understanding all the possible ways of financing it will allow you to make wise choices that benefit both your wallet and overall financial wellbeing.
There are various methods of raising capital for your business, including loans from banks and financial institutions as well as retained earnings or selling shares.
Financial statements provide an accurate account of how well your business has performed over a given timeframe, helping you plan its expansion and secure funding from investors or lenders.
Income statements (also referred to as profit and loss statements) detail how much revenue a business earned during a given timeframe compared to how much was spent on expenses related to that revenue generation. When these costs of sales and expenses are subtracted from net revenues, you arrive at the company’s profit figure known as net income or margin.
Balance sheets are also an invaluable financial statement, detailing a company’s assets, liabilities and shareholders’ equity at any one point in time. A company’s balance sheet serves as an indicator of its ability to meet future financial obligations without selling off all its assets or incurring additional debt.
Cash Flow Statements
Cash flow statements provide a comprehensive account of your company’s finances, detailing how much money is coming in and going out, helping you stay on top of its spending and make smarter business decisions.
A cash flow statement’s initial section shows how much cash flows from operating activities, such as sales, salary payments, and rent payments. By deducting expenses from income, this section should show positive cash flows; otherwise it will show zero positive numbers indicating negative cash flows.
Cash flow statements contain another section which details investments such as purchases or sales of fixed assets and investment securities, with this cash flowing through from owners, investors and creditors of a business.
Cash flow statements are essential to all businesses as they allow you to know if there is enough cash available for short-term needs and plan for future expenses. A cash flow statement helps business owners know if their company has enough resources available for these expenses and could prevent bankruptcy proceedings, track expenses more accurately and plan effectively.
Strategic plans are an integral component of financial and management planning and control for any organization, helping set priorities, allocate resources, align shareholders with employees, and substantiate company goals with evidence and sound logic.
While strategic plans tend to span three to five years, businesses should regularly review them as their business environment changes – whether that means introducing new products, the economy shifts or new regulations come into effect that impact them.
Strategy development starts by setting and aligning goals across four areas or categories – financial, customer, internal business processes and learning and growth. Once set, these goals can be organized on a map which can then help translate overarching objectives into specific actions and tasks.
Debt management is a strategy for reducing unsecured debt that involves working with credit counseling agencies to devise a monthly payment plan, typically including reducing interest rates on your credit cards or negotiating with creditors in order to lower balances – or both!
Debt settlement is another radical way of managing debt that involves negotiating with your creditors for a lump-sum payment, usually over several years and at great expense to your credit rating. This solution should always be seen as the last resort.
Before choosing any company for debt management, ensure you do your research thoroughly and consider its reputation before making your choice. When looking for nonprofit agencies accredited by the National Foundation for Credit Counseling (NFCC).