To survive and succeed, every woman needs to have a strong understanding of the financial aspects of running an enterprise.

Financial health checklist for small business owners

The number of women taking the entrepreneurial leap has been on the upswing for the last decade. Changes in cultural perception, improvement in education and socio-economic factors have encouraged more women to start their own ventures. Besides domain expertise and a sound business model, every woman needs to have a strong understanding of the financial aspects of running an enterprise.

Here is a financial planning strategy checklist that will keep your business in good health and allow you to achieve your entrepreneurial goals.

Budgetary management

One of the biggest pain points for small businesses is streamlining cash flows. Inadequate operating capital can create all kinds of problems and is one of the primary reasons why fledgling businesses fail to take off.

  • The first step in ensuring capital adequacy is to understand your total operating cost and the corresponding revenue you need to generate to break even.
  • Look to drive sales of the products or services that you offer; these are considered  ‘cash cows’ to get to your break-even point.
  • Keep track of all fixed and variable expenses and revenue streams to build in predictability and look for opportunities to adjust and rebalance finances so that you can be consistently cash flow positive.

Related: Government Schemes That Can Help Women Entrepreneurs In India Grow Their Small Businesses
Investment management

Investment management

Small business owners need to consider investment management separately from both a personal and professional point of view. Many women make the mistake of ploughing all the capital back into the business. The lack of clear demarcation can lead to ad-hoc withdrawal of funds and compromises on the growth of personal equity.

  • Evaluate your personal needs and pay yourself a salary just as you would any other employee. Make systematic investments towards your other personal goals, such as buying a house or your kids' higher education. 
  • To diversify your risks, ensure your personal investments are outside of the industry in which your business operates.
  • Building cash reserves equivalent to three months’ working capital ensures that your operations don’t come to a halt due to unforeseen circumstances. On similar lines, figure an emergency fund for personal needs.
  • Get requisite insurance for different needs. From personal insurance for self, workman’s compensation for employees, business liability cover, property and inventory, etc., so that all your assets are protected from various risks.

Tax management

Tax and its applicability significantly vary depending on the industry you operate in and the constitution of the business. One of the primary tax tips for small business owners is to figure the business constitution basis the benefits you can avail of. 

  • Get a tax expert on board who understands your financial situation and can help maximise benefits while optimising tax liability.
  • If your business fulfils the criteria to be featured under the Startup India Campaign, the establishment will be eligible for a three-year tax holiday in a block of seven years.
  • Keep track of GST receipts and payments. GST credits enable tax savings and give you much-needed liquidity.
  • On the personal front, maximise rebate on investments and insurance under Section 80C and 80D respectively. If you have a home loan, a part of the interest repayment can be offset against taxes under Section 24.

Related: Small Businesses: Taxation 101

Financial management

At some point or another, small businesses have to consider financing options. Look for the appropriate funding basis for your needs. 

  • If your cash flows have reduced, you can go for a working capital loan. Similarly, a bank guarantee or letter of credit helps you get in stock/materials to maintain output.
  • There are a host of government schemes that offer fast-tracked loans, subsidies and preferential credit availability to women entrepreneurs. Annapurna scheme, Mudra Yojana scheme, Udyogini scheme, Mahila Udyam Nidhi scheme are some of the options specifically geared towards women entrepreneurs. 
  • Most public and private banks offer a basket of loan products to women-led businesses at preferential rates.

Related: 10 Bank Loan Schemes For Women Entrepreneurs

There are thousands of women who have turned their modest ventures into enviable conglomerates. Armed with the right mindset, determination, vision and financial knowledge, you too can scale and succeed.