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Guest Column by Dean Swanson

 

In my last column I shared the steps toward making your business plan a reality by making your new business “official.” But no business will be successful without the important administrative and operational structure upon which to build this new creation.

This whole process includes many complex financial, legal and tax considerations. The decisions you make about them will have lasting ramifications for your business. To help make the best decision, I urge new CEOs to work with a  SCORE mentor as a sounding board. Your mentor can help you think through your options and assess the pros and cons of each. They can also direct you to other sources of information and advice.

This is the seventh in a series of columns that provide several helpful business topics for the new small business.  It is based on one of SCORE’s recent projects that was developed with the help of and in partnership with FedEx.  This project is called “Startup Roadmap” and outlines every step in starting a business. A SCORE mentor may use this program to help you reach your goal smoothly.

Space does not allow me to discuss the fine details, but here are seven steps to build that firm foundation. (I will dedicate future columns to expand on some of these)

Step 1: Set up accounting and bookkeeping systems. As a part of your planning process, you determined how much startup capital you’ll need to launch your business. Setting up accounting and bookkeeping systems now will ensure that you manage your precious capital wisely.

With a good accounting system in place, you’ll know how much cash you have in the bank at any given time and whether you can meet your expected expenses. You’ll also be able to measure your progress toward profitability. As a business, you need accounting, bookkeeping and financial recordkeeping systems to meet regulatory requirements such as paying your business taxes.

Carefully consider this:

• Decide who will handle your accounting activities

• Choose your accounting method

• Choose your accounting software

Step 2: Plan for paying taxes 

When your business is very small and simple, you can probably prepare your own taxes. However, as with accounting and bookkeeping, the bigger question is whether this is the best use of your limited time. Good tax preparers do much more than prepare and file your taxes. They can offer you advice on how to make the most of your tax deductions and keep more of your hard-earned profits. Many business owners find the money spent on professional tax preparation comes back to them in savings.

Step 3: Set up systems for getting paid   

Getting paid is at the heart of business success. By making it as easy as possible for your customers and clients to pay you, you’ll start seeing a profit faster and improve your cash flow so you don’t drain your startup capital. 

Your options for getting paid will vary depending on whether you are a B2B or B2C business and whether you sell products online, offline or both.

Step 4: Set up systems for paying others 

Being prepared to pay others helps you get the products and services you need to run your business. Choosing the best payment method enables you to conserve your startup capital by, for example, using a credit card with flexible payment options. By establishing a payment history for your new business, you’ll also build a business credit score separate from your personal credit score. This makes it easier for you to borrow money in the future if you need it.

Step 5: Legal considerations  Legal agreements, or contracts, are part of every business, from the business entity you choose to your office lease to the contract you sign when you place an order with a vendor or get an order from a client. Using contracts is a proactive way to protect your business against misunderstandings, unfair practices or broken promises.   

A contract is a set of legally enforceable mutual promises made by two or more parties. The basis of any contract is an offer (of a product, service, etc.) in exchange for consideration (money or something else of value) and acceptance by all parties.

Step 6: Set up business insurance and risk management  You’re putting a lot of time and money into your startup — all of which could be wiped away by a disaster such as a fire or a flood, a burglary or a lawsuit from a customer. Making sure your business is properly insured for the risks that it’s most likely to face will give you peace of mind and protect your investment.

Step 7: Set up record keeping systems

In the first steps that I suggested, you made important decisions about financial record keeping and tax documents. Now it’s time to decide how you will store and secure your important records. Setting up secure, well-organized record-keeping systems now will help your business start off on the right foot.

Dean Swanson is a volunteer certified SCORE mentor. Visit the local chapter online at www.scmnscore.org.