It’s starting to feel like spring, meaning it’s a good time to do a little financial spring cleaning. If you didn’t tackle some of these tasks before the end of the year, take a few steps today to get your financial house in order for 2015.
1. Review your credit profiles.
At least once a year it makes sense to take a look at both your personal credit score and your business credit profile to make sure they are accurate and to get a pulse of where you are. One place you can access your free personal credit report is at AnnualCreditReport.com.
Although they don’t offer a free annual report, you should also consider reviewing your business credit profiles with Dunn & Bradstreet, Equifax, or Experian at least once a year. Any mistakes on your profile could negatively impact your ability to secure a small business loan.
2. Clean up old files and financial records.
It’s also a good time to clean up files and consult with your CPA or tax lawyer to implement an efficient way to manage archiving documents. The IRS offers some general advice regarding how long specific documents should be kept on file. Here’s a list of some of the most common business documents and how long the IRS requires you to keep them on file (but be sure to consult your CPA or tax attorney for details):
- Business Income Tax Returns and Supporting Documents—The IRS recommends you keep your final tax returns permanently and any supporting documents for at least seven years.
- Employment Tax Records—They also recommend you keep all employment tax records for a minimum of four years after the date those taxes were due or were paid (whichever is the latter).
- Business Ledgers and Other Key Documents—Your CPA will likely suggest you keep these documents permanently and will help you determine the best way to archive these records.
3. Set Financial Goals.
Although there are a lot of financial goals a business owner might consider, here are two often overlooked goals that might make sense for you and your business:
- Increase your financial knowledge. Although most small business owners don’t start a business because they are expert accountants, it’s important for every small business owner to be an expert on the finances of his or her business. Unless you love the bookkeeping and accounting process, you’ll eventually hire someone to manage those day-to-day tasks. Nevertheless, you will need to review the books on a regular basis and keep track of budgets. You’ll also want to make sure you can read a few basic financial reports like a Profit & Loss Statement, your Balance Sheet, Income Statement, Statement of Retained Earnings, and Cash Flow Statement. If you don’t completely understand these reports right now (which isn’t uncommon) have your accountant explain them to you, so you do. If they can’t or won’t, it’s time to find a new accountant.
- Learn more about small business financing. The world of small business financing has changed a lot over the last several years. Overall small business lending from banks has decreased, making it more difficult to acquire financing from that traditional source. Fortunately, non-bank lenders are entering the space to fill that void. But be aware, these lenders may offer a range of loan products that should be matched to your particular need. A loan that might be a great fit for one situation might not make sense in another. What’s more, loan terms are often different from those associated with a traditional small business loan. You’ll need to do some homework to determine which loan might best meet your needs, and what options you may qualify for. Businessloans.com, a credit education tool created by OnDeck, is one resource that seeks to provide an overview of the small business lending landscape and offers insight into the different loan types available to business owners.
Sweeping away the winter cobwebs isn’t the only way to approach spring cleaning. Looking at the financial health of your small business once a year is an important part of keeping your financial house in order.
Ty Kiisel is a contributing author at BusinessLoans.com, a new resource full of content addressing all aspects of business financing for small business owners. Ty has over 25 years of experience in the trenches of small business and provides personal anecdotes and valuable tips to help small business owners become more financially responsible.