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Understanding your business finances is non-negotiable. Strong accounting habits not only help you stay compliant but also help your business grow.
Business Funding Group LLC (BFG) has expertise in financial wellness for businesses, as demonstrated by our work in helping businesses secure Small Business Administration (SBA) loans. These 8 financial accounting skills for business success can help you put SBA capital to work confidently and responsibly.
1. Cash Flow Management
A key financial accounting skill for successful businesses is cash flow management, which involves tracking the inflow and outflow of cash, as well as their timing. If you are using SBA funds, this skill is essential. It helps you time your spending, avoid cash crises, and ensure you can repay your loan on schedule.
Monitor weekly, rather than just monthly. SBA loans come with terms, and you will want to ensure you have liquidity in the right places at the right time. Cash flow is one of the most important factors that lenders consider.
2. Budgeting and Expense Control
Being skilled in allocating business funds effectively prevents overspending and ensures sustainable, successful financial growth. Good budgeting also helps you resist the temptation to treat loan funds like unlimited capital.
One actionable tip is to break down your budget by department. This is especially important if you are hiring, expanding your product line, or launching marketing campaigns.
3. Forecasting Revenue and Profit
Techniques for estimating business revenue based on trends, sales history, and external factors enable more strategic financial decisions about hiring, expansion, and marketing.
Create multiple forecasts that include both the best- and worst-case outcomes. Make sure your plan works in both.
4. Understanding the Difference Between Profit and Cash
You can show a paper profit and still run out of money. Loan payments, inventory purchases, and payroll all draw from cash, not just net income.
Use an accrual-based financial accounting system to assess profitability accurately, but always monitor your cash position to keep your business stable and profitable.
5. Loan Compliance and Recordkeeping
SBA loans have guidelines. You will be required to track your use of the funds and maintain accurate records for your lender. Knowing what documentation is required helps you avoid surprises down the line.
Keep digital copies of all receipts and categorize expenses clearly to successfully maintain accurate financial accounts for your business. Your lender may request a breakdown of your expenses during the loan term, so it is essential to ensure compliance.
6. Break-Even Analysis
One of the most useful accounting skills that supports successful financial decision-making is break-even analysis. This helps you determine how much you need to sell to cover your costs (including fixed and variable).
If you are launching a new product or service using SBA capital, this calculation will tell you how long it will take to recoup your investment. Also, do not forget to re-run this analysis whenever your costs or pricing change.
7. KPI Tracking and Interpretation
Your financial accounts demonstrate your skill and success in running your business. Knowing how to read your accounts is essential. Key Performance Indicators (KPIs) such as gross margin, net margin, customer acquisition cost, and inventory turnover rate reveal what is and is not working.
For example, pick three to five KPIs to track each month and use dashboards to keep them visual and straightforward.
8. Understanding Funding and Financing Terms
If you are taking on an SBA loan, understanding how terms, amortization, and interest affect your bottom line is vital. Getting the money is only the first step. Managing it wisely is essential. Understanding funding and finance is one of the foundational accounting skills that drives financial growth and business success, and reduces unnecessary debt.
Match the loan term to the lifespan of your proposed investments. For example, if you are using funds to hire staff, ensure your revenue timeline supports this.
Call BFG Today To Discuss Financial Accounting Techniques To Help Your Business Succeed
With an SBA loan, you can hire key staff, expand your product line, or scale up your operations. Having these 8 financial accounting skills for business success will help you use the funds with confidence.
At BFG, we specialize in helping profitable businesses get the financing they need. We are here to help you match the right funding to your business strategy.
Call us today or get started with our easy application online. We could guide you through the eligibility process, documentation, and everything else you need for a successful application.