Where do the Monthly Expenses Go in Starting a Small Business?
A Home Business Article Contributed by G. Uma Bennett
Monthly Expenses involved in Starting a Small Business?
Once you have the calculation of fixed one time expenses needed in starting your small business, the next step is to determine what financing you will need on a monthly basis. Your monthly expenses will vary depending on what type of business you operate and whether or not you have employees. First and foremost you must pay yourself and your employees. Next is the rent, utilities, insurance and taxes to maintain your company. Other essential like taxes, telephone service, advertising, maintenance, legal and other professional fees should also be included.
Starting Small Business Basics: Understanding the Balance Sheet
Understanding how to start a small business means understanding finance. The balance sheet is a view into a company's finances at a certain point in time. It shows the company's financial position; what assets it has and its liabilities and net worth. The assets = liabilities + net worth of a balance sheet must always balance. The elements of a balance sheet change from day to day and reflect the activities of the company. Using the balance sheet and analyzes how it changes over time reveal important information about the company's business trends as well as how it will grow in the future.
Use Financial Statements Wisely
Using your financial statements to assist you in starting your small business and you will find you can monitor your ability to collect revenues, how well you manage your inventory, and even assess your ability to satisfy creditors and stockholders. Liabilities and net worth on the balance sheet represent the company's sources of funds. Liabilities and net worth are composed of creditors and investors who have provided cash or its equivalent to the company in the past. As a source of funds, they enable the company to continue in business or expand operations.
Maintaining Stability while Starting your Small Business
Besides keeping customers happy when starting your new small business, there are other considerations. If creditors and investors are unhappy and distrustful, the company's chances of survival are limited. Keeping accurate financial records are key in providing the information you, your creditors and investors need to understand how the stability of the business. Assets represent the company's use of funds. The company uses cash or other funds provided by the creditor/investor to acquire assets. Assets include all the things of value that are owned or due to the business.
Make the Most of Your Assets
Obtaining funding for starting your new small business is only the beginning of the financial journey. Once you are established and begin keeping records, you will need to put this funding into proper category on your financial statement. Cash, is your most basic asset and the only game in town; it pays bills, buys inventory, receivables, land, building, machinery and equipment. In addition to this, anything that can be converted to cash quickly is considered an asset, including money market, stocks, bonds, options and short term savings accounts.
