One of the most famous American gangsters of the prohibition era in the United States was Al Capone. Known as “Big Al,” he attained notoriety as the head of the Chicago Outfit, one of the biggest crime syndicates the US has ever seen. Decades later, he served as inspiration for movies like Marlon Brando’s “The Godfather” and Al Pacino’s “Scarface.”
Perhaps the most interesting facet of Capone’s life is his later years as a crime boss and his running from the law. As some of us know, no matter how many crimes he committed and how many people died in their wake, he wasn’t caught because of this. The great agent Eliot Ness was able to catch Capone and put him in prison because of tax evasion.
In the court’s eyes, Big Al didn’t break any criminal laws, but rather, financial ones.
What this story tells us, among many other things, is the importance of sound financial judgment in business. Without literacy, information, and knowledge, any company will falter, regardless of industry, market share, or profitability.
For starting entrepreneurs, maneuvering the financial trenches can be a daunting challenge. There are too many rules and regulations to follow, too many details to be conscious of.
Still, it starts with common sense and long-term vision. If you are the founder of a small corporation or are thinking about starting one, important financial aspects to consider include insurance, understanding the books, following the law, and maintaining a high credit score.
Protecting What You Have
If you had the money, would you buy health insurance for your spouse and child? Would you do whatever you had to to make sure they are safe, happy, and healthy? Any good father and husband would give a definite yes to both questions. He would work hard to earn money and protect the people he loves.
Why? The answer is straightforward. It is because they are important.
The same goes for your business. Your firm is the source of your income. It puts clothes on your body and food on your table. As such, you need to safeguard it in case of an emergency, a downturn in the economy, or a natural disaster. If you get earthquake or flood insurance for your home, you should do so for your company as well. You are not only securing your way of life but also preventing unnecessary future headaches.
Knowledge is Power
All new businesses should hire a full-time certified public accountant. A qualified individual will make sure your enterprise is functioning properly. He will also prepare your taxes and give you advice on how best to maximize your resources.
But this doesn’t mean that you don’t need to know about financial accounting and what this entails. Of course, you don’t have to be an expert. After all, if you are a restaurateur, your expertise is probably food. If you start a furniture business, you know how to design or build tables, desks, closets, and racks.
Still, terms like profit and loss statement, accounts payable, accounts receivable, capital, balance sheet, and assets shouldn’t be foreign to you.
Knowing the Law
Not knowing the law is not an excuse for breaking it. A defense based on ignorance or negligence will never be successful in a court hearing. Thus, it is your responsibility as an entrepreneur to know local, regional, and national laws concerning your company. A CPA will help you navigate the legal world of taxes, investments, accruals, and so on.
But you should also be aware of the legal ramifications of starting a new company and best practices. Financially-speaking, this could help you avoid expensive fines and even the closure of your firm.
A Great First Impression
Ways to expand your business include investing in office space, developing new technologies, and hiring more employees. If you plan on doing this and you need to get a loan, the first thing your bank will look at is your credit score.
If you want yours to be high, you should pay your bills on time, manage your company’s debt, and engage in proper accounting practices.
As we mentioned, this will increase your chances of getting a bank loan. It will also enhance your reputation among existing and potential customers.
There are many people with great ideas. Some succeed, and others don’t. There are many factors for this, including timing, location, and luck.
However, the most important one is usually taking care of the details. From a financial perspective, this involves getting insurance, having information, knowing the law, and maintaining a good credit score. They are essentials for any business wanting to thrive.