Financial Wellness Month: January 2021

Tax season is upon us folks, stretching from January 1st to April 15th. For that reason, January is also recognized as Financial Wellness Month. It’s a new year, and even more than that, it’s a new decade! Now is the time to assess your financial health and get your business finance arranged.

But what is a healthy business anyway? Well, just like your car needs a tune-up on a normal basis, your business also needs to be evaluated in order to maintain proper performance. Here, we’ll give you some great useful financial wellness tips for the coming year (and decade!).

What is a ‘financially healthy’ business?

To put it simply, a ‘healthy’ business is one that has its budget balanced, and has an effective plan for when unpredictable obstacles come up. This may sound easy, but if your business is like any other, chances are there are some difficulties when it comes to keeping your finances in line.

Most challenges can be avoided by simply staying organized, but other challenges can arise without warning – that’s why it’s crucial to realize the importance of keeping your business healthy, even when the pressure isn’t on. The financial decisions you make today will echo into your business’s future. So get on the ball today!

Make sure not to spend more than you make. Pay your bills on time. Keep your business wants separate from your business needs. Okay, okay. This all sounds like run-of-the-mill advice that your grandparents would’ve given you, if they owned a business, that is. We’ll reveal the real financial wellness tips just below…

How to check if your business is ‘financially healthy’

So Financial Wellness Month 2021 has got you in the ‘healthy business’ mindset, but you don’t know where to start. Well, first thing’s first – you need to know how to check if your business is healthy before you can start adjusting your business finances. There are a few easy questions you can ask yourself to help you make a financial health-assessment…

1. “Is my business profiting?”

While assessing profit levels isn’t going to give you a lot of information about what steps to take to better your business situation, checking if you’re making more money than you’re spending is one simple way to tell if your business is at least heading in the right direction financially.

2. “Am I spending more on inventory than I need to?”

There are a number of benefits to calculating how much money you spend on goods in order to keep your business running. First and foremost, you’ll provide yourself with the basic information you’ll need to establish the pricing structure that will work to the best advantage of your business’s health. Beyond that, it will also help you maximize your profits – no complaints there!

3. “What is my business’s net income?”

Your net income is the amount of money your business is making, after taking the operational costs into account. In other words, net income is the money you’re left with to either save or to reinvest. Generally speaking, a healthy business has a high net income but doesn’t cut corners on the operational quality of its services or products. The simple equation to calculate your net income is:

Net Income = Gross Profits – Operational Costs

4. “How does my debt look?”

Hopefully, this doesn’t come as a huge surprise to you, but you want your business’s amount of debt to be low. Now, that doesn’t mean you should avoid debt at all costs (no pun intended).

Occasionally you may want to make big renovations or upgrade a piece of equipment you’ve avoided replacing for a while, and you may have to take out a small business loan to fund those improvements. In general, keep the debt to a minimum. You want your debt to total assets ratio to be as close to zero as possible. The equation is easy:

Debt to Total Assets Ratio = Value of Debt / Value of Assets

5. “Have I planned for emergency situations?”

While you might take business loans out to make improvements that you wanted to make to your business, emergencies that you need to handle may arise at any point. For your business to remain healthy, it is crucial to have a business disaster recovery plan for those unavoidable financial obstacles. When a financial storm hits, make sure your foundation is strong by having approximately four-months’ worth of expenses saved in advance. This will ultimately help you avoid the necessity of going into debt to make it through a rough patch.

One important note: Of course, the type of business will affect the kind of industry loans a business needs, as well as the specific circumstances that business finds itself in. Be sure to weigh your options carefully in order to choose the right funding solution for your business.

Business finance planning: How to make a financial plan

We’re keeping it short and sweet this time around. We’ve got three simple steps that can make all the difference. Follow these tips to help you make the financial plan that will ensure your business health during this Financial Wellness Month.

Learn more by reading our comprehensive guide to business financing.

1. Track expenses

Sounds easy enough, right? Well, as elementary as it might seem, most people who have a ton of debt are in that position because they don’t follow this basic piece of advice. Setting a budget and sticking to it is a crucial step to take on the road towards financial success.

Tracking expenses becomes especially important as net profits increase; typically speaking, as businesses begin to make more money, they begin to spend more money. It’s critical to regulate your spending so as not to operate your business beyond its means.

Speaking of tracking expenses, there’s a new Shopify profit calculator available that can help you keep your Shopify store’s profit margin calculations more accurate than ever.

BeProfit – Profit Tracker is the best Shopify calculator out there. Use the app today to start making data-driven decisions that help optimize your profits.

2. Make a cash flow projection

So far, we’ve discussed how to take action today to improve your business finance. Although it’s true that there is no day like today, tomorrow has a lot to offer your business! Forecasting your cash flow for the next year, as opposed to just the next month, will help you get prepared for those milestones later on.

Whether you anticipate having a financial boost as a result of a deal with an investor, or if you expect to take a financial hit because of a seasonal downturn, it’s best to do the number-crunching in advance so you can take full advantage when you do reach those achievements or challenges. Plan your spending and your saving ahead of time.

3. Plan for contingencies

We’ve said it before, and we’ll say it again: save up for a rainy day. As much time you may spend projecting your business’s cash flow and preparing for the ups and downs, there will inevitably be an unpredictable hurdle to clear along the way.

Being surprised is one thing, but being unprepared is something different altogether. Don’t get caught in a jam; plan ahead for the stormy weather by saving what you can ahead of time. If the amount you’ve saved in your emergency funds doesn’t cut it, or even if it does, applying for a business loan through an online lending platform like Become may be your best route of action.

Bringing health and wealth together

Keeping your business healthy isn’t all that hard to do when you’ve got the guidance. We’ve done the research for you, now all that’s left to do is put it to practice. Your financial success depends on your business finance planning. Don’t leave it to luck or last minute. Take the advice above and start getting your business on the right track for Financial Wellness Month 2021.