Elawyers Elawyers
Washington| Change
Behind every profitable and efficient small business is the effective accounting and management of its finances, which includes everything from start-up financing and debt to bookkeeping and cash management. This section contains articles and resources to help you get a grip on your business operation's finances, covering such topics as how to read a balance sheet, warning signs of embezzlement, what to expect when estimating business start-up costs, and how to secure a small business loan.

Small Business Accounting

Accounting and financial management are crucial functions for any business. Even the best business plan can fail without proper financial planning. Accountants are tasked with interpreting financial data, assessing a company's current situation, and giving advice for the company's future. Bookkeeping, which is integral to accounting, is the process of recording the data used in accounting.

The key to successful accounting is to maintain accurate records of expenses, revenues, and related information. These records are kept in the general ledger, which is a single document showing the company's financial health.

One of the accountant's goals is maintain proper cash management. Companies regularly take on debt or trade equity for capital, usually to help them grow or expand, but this has to be kept in check and balanced by a sensible cashflow.

Credit and Debt Collection

Companies that extend credit to their customers -- usually through billing -- usually are able to do more business. Customers are more likely to take advantage of special deals or big purchases if they don't have to pay for it all up front. But credit comes with a risk. Customers who fail to pay, or pay late, can create cash flow problems for your business. You will want to implement an effective debt collection procedure in order to protect the interests of your business.

In addition, you will need to comply with the Truth-in-Lending Act (which regulates interest charged on overdue payments) and other laws related to credit and debt. From a practical perspective, it's typically more effective (and customer-savvy) to save the use of debt collection agencies as a last resort.

Business Loans and Investors

It takes capital to start any business. How much will depend on the startup costs, including labor and supplies, and may require several loans or cash from investors. The two main types of outside financing for a business are debt and equity, each with its own advantages and disadvantages.

An equity investment is essentially an exchange of equity -- a portion of the company -- for capital. Equity investors, particularly venture capitalists, not only own a portion of the company (in proportion to the investment) but also have some say in the company's executive management. But the main advantage is that you don't have to repay the cash investment.

When securing a business loan, in contrast, you won't trade away any equity and will retain full control of your business. The downside is that loans are often difficult for small businesses to obtain and incur interest. And if you default on the loan, you may have to forfeit a home, car, or other collateral.

Please choose a link from below to learn more about small business finances.

Recent Topics

  • Payment and Collection Options for Your Small Business
    Created by FindLaw's team of legal writers and editors.

    Should your business accept personal checks, debit cards, or mobile payments? What kind of identification can you ask customers to show when making purchases? How does the law regulate the acceptance of large sums of cash? Establishing payment and co...

  • Accounting Forms and Contracts

    In addition to running a business and managing employees, small business owners must also stay on top of their financial records. FindLaw's section on Accounting Forms and Contracts contains forms, contracts, and other sample documents pertaining to ...

  • Business Accounting Terms You Should Know
    Created by FindLaw's team of legal writers and editors.

    The often intimidating, but critical, part of starting a small business is learning about the "numbers" side of the business. You may have a great product, unique concept, and personality in abundance, but if you can't get your head wrapped around ba...

  • Questions to Ask Before the Valuation Process
    Created by FindLaw's team of legal writers and editors.

    What is the Valuation Process? You may be wondering, "How much is my company worth?" When you go through the valuation process , you are basically determining what the company is worth. What that means is making reasonable estimates of the value of a...

  • Business Accounting

    Running a successful business takes a lot of time and work. One of the keys to running a successful small business is sound accounting and financial management. This is true of a business whether it accepts cash only or deals in large volumes of cred...

  • Business Banking and Securities Forms
    Created by FindLaw's team of legal writers and editors.

    Business Banking and Securities Forms

  • Business Loan Workouts
    Created by FindLaw's team of legal writers and editors.

    Business Loan Workouts

  • Cash vs. Accrual Accounting for Small Businesses
    Created by FindLaw's team of legal writers and editors.

    Overview of the difference between cash and accrual accounting, and how to decide which to use

  • Chronology: The Process of Going Public
    Created by FindLaw's team of legal writers and editors.

    A chronological summary of the process of taking your company public, from board approval to pricing the shares

  • Collecting Debts Owed by a Bankrupt Customer
    Created by FindLaw's team of legal writers and editors.

    When a customer doesn't pay his or her bill, business owners have a tough choice to make. In some cases, collecting debts can take a long time and cost more money than it's worth. If a customer goes into bankruptcy, many businesses will just give up ...

Can't find what you're looking for?

Post a free question on our public forum.
Ask a Question
Search for lawyers by practice areas.
Find a Lawyer