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Step 7. Obtain Legal Documents, a Bank Account, & Organize Bookkeeping

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Financial management is one of the most important aspects of a small decoration business.  Without a solid understanding of the business’s finances, it can be difficult to become a profitable enterprise.  The first step in the financing of any business is to complete a detailed business plan. Once you have a good business plan, and have filed the necessary paperwork to become a legal entity, the next step is to procure financing for your business.

Starting a new business comes with all kinds of new costs.  There are equipment costs, supply costs, costs associated with a retail space, payroll costs, and many more.  All these costs can add up if you are trying to finance the venture out of your own pocket. The first method of financing that we recommend is to finance through friends and family.  Now, it can be tricky to work with those close to you, but they are the easiest route to financing and they will certainly offer the simplest terms for repayment. After friends and family, there are two primary methods of outside investment: finding investors or taking out a loan through a bank.


There are two major kinds of investors: angel investors and venture capitalists.  For a small decoration business, this route is less likely to be fruitful, but it does merit consideration.  Both angel investors and venture capitalists have money that they want to invest in new ventures, but they typically go about investing in very different ways.  Angel investors are more hands-off, though they often take on the role of an advisor for the business. Venture capitalists, on the other hand, desire a certain amount of control and/or input in the business in exchange for their investment.  Both of these are typically excellent methods for financing a business if they are available to you.


If you are unable to find an investor for your business, then the last option is to take out a loan or start a line of credit through a bank.  If the terms of a loan or line of credit are favorable, then this is a good method for a small decoration shop to obtain financing. However, the bank will require collateral for your loan.  Collateral is an asset (or assets) that you offer the bank in the event that you are unable to pay off your loan. No method of investment in a small business comes without some risk, but if the business is managed well and the finances are diligently tracked there is no reason that you should be unable to pay off a loan.  


Whether or not you choose to finance through a bank, you will need to go to a bank for a business bank account.  It is far easier to document and monitor your business’s finances if you have a bank account. It is not a legal requirement to open a business bank account, but it is highly recommended.  In order to obtain a business bank account you must have your business name registered with the state and a tax ID number. Most banks do not charge any extra fees for business accounts, but you should select a bank that you trust.  If possible, choose a bank that you have worked with in the past.


Once you have obtained financing and opened a business bank account, the final (and ongoing) step in the financial management of your product decoration business is bookkeeping. Careful bookkeeping is an essential part of a successful small business, and it is also an excellent (and required) safeguard in case of a tax audit from the IRS.  Bookkeeping for a small decoration shop can be kept simple. Step one is to purchase bookkeeping software like Intuit’s Quickbooks or Netsuite. Running bookkeeping through one of these programs will be far easier than trying to operate with a journal, ledger, and spreadsheets.  


Most bookkeeping software can integrate into whatever point-of-sale (POS) software you use to record transactions, allowing all profits to be recorded in your books without you lifting a finger.  Most of the human work involved in bookkeeping is entering expenses. Each and every expense for the business must be recorded in your books. It is also wise to break down expenses into specific categories so that you can track how much the business spends on its various needs.  This important not only for legal reasons, but also because almost all expenses for the business are tax-deductible. They will greatly lessen the load on your yearly, semi-annual, or monthly taxes. For a small decoration business, entering profits and expenses is about as much as is necessary to keep books.  


In addition to the legal and practical reasons for bookkeeping, you can also generate many useful reports with your bookkeeping software, including a balance sheet, cost-of-goods-sold, break even point, and more.  These reports will help you to gain a deeper understanding of your business’s finances. A balance sheet, for example, details all the business’s assets, liabilities, and capital at a given time. With this information, you can determine if the business is in good financial standing.


Managing the finances of a business is important work, but it does not have to be extremely complicated.  The two most important aspects of a business’s finances are securing capital (in the form of investment or a loan) and bookkeeping.  By securing startup capital you are ensuring that the business can handle any expenses that may come its way without risking the ability for the business to operate successfully.  Once you have your capital and the business is running, keeping track of the business’s finances is critical. A successful business is a business that can keep its expenses to a minimum in order to maximize its earnings.  The only way to be sure that expenses do not outstrip profits is to keep accurate books. With the help of bookkeeping software, managing a business’s finances can be simple and yet extremely valuable to the business.  


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