As a small-business owner, you know how easy it is to get tied up in the day-to-day details of running a business, but to ensure that your business thrives now and into the future, you need to periodically take stock of your company’s overall financial health. Below we’ll go over a financial checklist that will help to positively impact your bottom line and long-term business goals.

Establish an Exhaustive Analysis of Your Business

When evaluating the financial health of your business, it’s necessary to focus on three main areas: financial planning, budgeting, and investing.

Assess Your Financial Plan

It’s crucial to identify clearly defined financial goals for yourself and your business before you can begin to take on other small business challenges, including the most fitting tax planning strategies to reinforce your goals.

Checklist:

• Write prioritized lists of both personal and business goals, and evaluate them at least annually, but quarterly is even better. Consult these lists whenever you need to make decisions that could affect your personal and/or business financial health and long-term goals.
• Take the time to understand the specifics of what your business structure offers in terms of protections and benefits. The more informed you are on the details of your business structure, the better you’ll know if a different option could be more fitting for your business.
• Establish a tax plan for your business that a) centralizes reducing or deferring taxes, and b) boosts your available credits and deductions. This plan can include charitable giving, timing income and expenses to your advantage, and retirement savings such as a Simple IRA, solo 401(k), or SEP IRA.

Use Your Business Plan as a Guide to Budget

Does your original business plan still reflect your company’s vision and goals? An updated and refined business plan will help to ensure that your small business refrains from falling into common risks and drawbacks.

Checklist:

• Before you can consider generating a profit, you need to determine the amount of revenue needed to break even after covering fixed expenses (rent, salaries, utilities, etc.).
• Regularly revisit your budget to monitor your income, inventory, credit, and cash. Make any tweaks to your budget as needed in order to cover fixed expenses and maintain a healthy cash reserve in case of the unexpected.
• If you need financing, analyze your budget and cash flow trends to help determine which financing options are the best fit for your particular needs.

Look Beyond Your Business for Investment Opportunities

Fight the urge to invest all of your resources into your business. A diversified and healthy method of saving and investing may afford you more security than throwing everything into your business.

Checklist:

• Set up an emergency fund for your business as well as your personal finances. This will keep you from needing to tap into funds intended for other purposes, such as retirement savings, if you run into a business cash flow shortage.
• If your business is in a season of cash influx, and your expenses are covered, think about investing the extra money into an account outside of your business.
• Be sure to diversify your investments in companies that are separate from your industry. If your industry experiences a downturn, keeping money in other companies will help to maintain some financial stability.

Another Area Worthy of Focus

Once your financial planning, budgeting, and investing is thoroughly in order, you need to protect your business by properly insuring it. Types of insurance that can be most beneficial to small business owners include:

• workers’ compensation insurance
• health insurance
• property insurance
• liability insurance
• life and disability insurance, which can be used as collateral for loans, as fringe benefits for employees, or to fund succession plans
• Business interruption insurance, which can cover lost income and expenses in case of disaster

A financial health checklist is immensely helpful in capturing a big picture of your company’s financial situation, and it will allow you to guide your business in a way that will promote cash flow and positively impact your bottom line in the near future.