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How Business Owners Can Manage Their Money

By Shamez Kassam, CFA, MBA

Proper financial management is crucial to the success of every small business. Not only does proper financial management free up your cash flow—allowing you to invest in your business and yourself—it also allows entrepreneurs to make timely, well-informed, and educated decisions based on objective facts surrounding the health and well-being of their business.

Despite this, many Canadian small business owners don’t have a firm grasp on their finances. Some only look at their financial reports annually or make decisions about the direction of their business based on a narrow slice of financial information instead of the entire picture. Other owners allow other parts of running their business to take precedence over paying attention to their company’s financial state.

Below we compiled a list of financially healthy habits business owners should implement to manage their money to ensure that their business thrives.

Effectively Manage Corporate Cash

One of the key objectives for business owners should be to utilize capital efficiently. For example, some business owners prefer not to utilize bank financing. Rather than sitting on excess cash in corporate bank accounts, many business owners would be better off obtaining a line of credit that is asset backed, with borrowing based on accounts receivable and inventory. That way, corporate cash can be invested to obtain better returns, and the asset backed line of credit would be available when needed. At Northfront Financial, we help business owners talk to their bankers to obtain the flexible and suitable form of financing for their business. In some cases, by employing this one technique, we have helped business owners generate over $100,000 in additional investment income. Over the longer term, business owners should also be thinking about how to liberate cash from their corporation using the Capital Dividend Account (CDA).

Review Financial Indicators Frequently

It is important to conduct a thorough review of your company’s financial data every month and compare your company’s performance to your long-term goals and objectives. Reviewing your finances frequently throughout the year can allow you to tweak certain details which will ultimately help you meet your goals by the year’s end.

Some financial indicators to monitor every month include liquidity, profitability, and growth. You should also research any financing available to small businesses from the government or the banks—particularly when interest rates are low like they are right now.

Educate Yourself

The reason you got into your business or line of work was probably because it enabled you to focus on doing what you love and what makes you happy. Your passion has now grown into a full-fledged and profitable business because you are really good at what you do, and your clients expect a quality product or service from you.

However, you probably don’t have the same passion or knowledge base for accounting, which can be problematic when managing your bookkeeping and trying to keep track of your cash flow. Thorough accounting can really help your business thrive, but understanding the fundamentals will help you implement the right financial tools in your day-to-day business. Consider taking a beginning accounting class so that you can manage your company’s finances effectively. Learning the basics will help you create a financial foundation to expand your business and reach more long-term goals.

Hire Professionals

So you now understand the basics of accounting, which will help you manage your day-to-day, but what about meeting your long-term goals? What steps do you need to make today to ensure that you are where you want to be in five years, 10 years, or even during retirement? Hiring the right professionals can help you implement financial tools and healthy habits that will allow you to invest in your business, save on taxes, and prepare for your future.

We’re Here To Help

We know you are an entrepreneur and that running your business is a full-time job. That’s why we are here to offer you the assistance you need to effectively manage your money and invest in your future. At Northfront Financial, we specialize in helping business owners achieve their goals. Call 403-571-8960 or email to set up an appointment with our financial advisors.

About Northfront Financial

Northfront Financial, based in Calgary, Alberta is a boutique full-service financial planning firm serving professionals and business owners. We pride ourselves on being a different kind of investment firm. This stems from our humble roots, entrepreneurial spirit, and a culture of integrity and professionalism. Our goal is to offer the best investment products, services, advice, and ideas the financial industry has to offer from our experienced team, which includes individuals with the Chartered Financial Analyst (CFA), Chartered Investment Manager (CIM), and Certified Financial Planner (CFP) designations. To learn more about Northfront Financial and how we can help you, visit our website and schedule a complimentary appointment.

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