You probably have dozens of things you “should” be doing right now, and looking after your finances might not be a priority. You need to balance keeping the lights on, looking after staff, and making sure customers are happy—but you need to stay on top of your money. 

When you’re limited on time and attention, you need a smart way to manage your business finances. We believe the best way to do that is to ask pointed, focused questions and use the answers to help your business survive and grow. 

Are You on Top of Bookkeeping and Reconciling All Your Transactions?

Reconciling your bank transactions is probably not a phrase that fills you with excitement—but if it helps you fill your bank account with money, that’s a great start. Essentially, reconciling your transactions means that you take all of the entries in your business bank account and credit card, and assign them in your accounting software. 

For example, if you send out an invoice from your accounting software, and it gets paid, you reconcile that payment back against the original invoice. Use reconciliation to:

• Make sure you track all of the actual money that comes through your business. 
• Keep on top of all your business invoices and expenses.
• Get all of your bookkeeping ready for tax time.
• Be confident that you’re up to date with your reports.

Reconciling your transactions is necessary before you can carry out the other advice in this questionnaire. We recommend doing this every two weeks.

Do You Understand the Money That’s Coming In and Going Out of Your Business?

A healthy cash flow is essential to running a successful business. This means you have enough money coming in that you can sustain your operations, balanced against the money you have going out. One of the best ways to understand your cash flow is to create a “cash flow statement,” which is something you can do in your accounting and bookkeeping software. You can use a cash flow statement to:

• Understand how much your business earns and spends over a specific period.
• Work out the financial health of your business.
• Show how well you’re managing cash within the business.
• Highlight different financial activities like operations, investment, and financing.

Analyzing your cash flow will help you understand the health of your business right now, and how it might look in the near- or medium-term. We recommend doing this on a monthly basis.

Are You Aware of the Main Costs and Expenses in Your Small Business?

If you want to maximize your financial health, you need to reduce expenses as much as possible. You can’t start to control your operational and one-off costs until you understand exactly where your business is spending money. This means categorizing your expenses and income, so you can make improvements. Managing your expenses means sorting them into the right categories and then creating a “Profit and Loss” report in your accounting software. Use this to:

• Find out exactly where your revenues are coming from.
• Work out the areas where you’re spending the most money.
• Reduce the most burdensome costs on your business. 
• Track how things are changing over time.

Categorizing expenses and managing profit and loss will help you maximize the long-term health of your business by eliminating unnecessary spending. We recommend doing this on a monthly basis.

Are You Writing Off All Your Allowed Business Expenses Against Tax?

Taxes can take a significant bite out of your small business earnings. A combination of self-employment / payroll tax, federal income tax, and state tax might mean you’re paying as much as 35 percent of your profits to the IRS and your state department of revenue. Claiming all of your allowable expenses can help you reduce your business tax burden.

Of course, if you don’t know what to claim for, you won’t know whether to expense it. Fortunately, we created a complete guide to taxable business expenses that will guide you through this process.

Maximizing your allowable expenses will reduce the amount you pay in tax. We recommend checking for expenses every couple of months.

Do You Pay The Right Amount of Quarterly Estimated Taxes?

Both the IRS and your state department of revenue will typically require you to calculate and pay estimated taxes four times per year. Estimated taxes are due in April, June, September, and January. Staying on top of your estimated taxes means you can spread the cost throughout the year and reduce your chances of having to pay interest or penalties when you file your tax returns.

Can You Build Up a Cash Buffer In Your Business to Weather Difficult Times?

The coronavirus pandemic and its dramatic impact on business has taught us how important it is to build resilience into operations. According to a study, most businesses only have enough cash-on-hand to finance their operations for around 27 days. When things get tough and revenue falls, a cash buffer is necessary to ensure survival. Here’s how:

• Look at your profit and loss report, and understand your average income and spending per month.
• Based on your cash flow report, see how long your existing assets would support your business.
• Calculate how much you would need per month if your revenue were reduced.
• Cut your expenses so you have more money to put into a cash buffer.
• Try to build up the cash buffer every month, until you have a few months of operating expenses.

Do You Have the Right Small Business Accountant?

Your accountant or bookkeeper can be a tremendous resource to help with the financial management of your business. Finding the right accountant can be a bit tricky, so we’ve put together this comprehensive guide. Use the questions to find the right professional and get the expertise your business needs.

Have You Refinanced Your Small Business Debt?

Taking out multiple small business loans from several lenders can significantly increase the amount of interest you pay, put you on different repayment terms with each, and make scheduling of payments difficult. If you consolidate and refinance all your debt into one small business loan, you can almost certainly take advantage of a lower rate and more favorable terms. You will need to:

• Gather information on your current loans like how much you’re currently paying, future obligations, repayment terms, interest rates, and affordability.
• Review options for refinancing your small business loan.
• Apply for a small business loan.
• Receive the money and use it to pay off your existing loans.

We hope you’ve found this small business health check questionnaire useful. Go through each of the questions, answer honestly, and make changes—one at a time. Over a few months, you’ll gain much greater insight into your small business, so you can be more confident you can survive and thrive.