It may seem stereotyping, but most business owners are really only interested in the bottom line. Even when they’re looking to get small business funding, it’s not so much because they like spending money, but because ultimately they plan to make money. Money is just a part of the game of business, and a way of keeping score of your success. That’s why the better you are at planning your business finances, the more likelihood you’ll end up one of the winners. Here are four things you need to know to understand your cash flow and bottom line.

Income

You should have diverse ways of making income in your business. You should be able to predict monthly how much money you make and find new ways to increase it over time. You should try to have active and passive ways to make income. Any money that you borrow should always be with the idea of creating income in the future, whether it’s to make your business processes more efficient, to reduce your costs, or to keep your business risk low.

Expenses

Reduce as much of your expenses as you can. That’s why business owners will wait to hire in a recession, as it is a large expense. Don’t forget to reduce expenses in your structure. For instance, taking a loan out to retrofit your company and make it greener right now, can save you money in the long run. You not only can take advantage of federal rebates, but also put in place systems that use less energy and are less costly to maintain.

Assets

Redistribute your asset portfolio as things lose or gain value. Real estate is a classic example of an asset that was solid before, and now risky. You might want to sell those assets that are at great risk of depreciating and buy those that are appreciating. Buy low, sell high. If that means you have to take out a loan to buy into assets that are a bargain right now, it may be in your best interest to do so while the timing is right.

Liabilities

Have you assessed your business risks lately? If not, you should do so every year. Federal regulations can impact your business profitability, and one such liability are the changes in health care. Do you know how this new regulation will impact your liability when you hire someone and how that impacts your business operation? Have you got a safe worker program in place to reduce the potential for accidents? The cost of the program may be far less than paying out compensation as someone gets injured. By keeping your eye on the bottom line and being proactive, you can leap ahead of liabilities that can be managed before they come to a head.

Tags: funding, small business