Q&A: Financial Planning Tips for the Small Business Owner

Every month we sit down with a member of the Johnson Financial Group Inc. team to discuss small business investing, wealth management and cash flow, which can lead to, improved business strategies and experiences.

Below, Ian Johnson shares financial planning tips for the small business owner.

Q1. What types of strategies can a small business owner incorporate into their financial planning activities?

A1. My suggestion would be to make sure the structure of your business meets your needs. Consult with an accountant to determine if your structure should include a family trust and/or a Holding Company. From there, make ongoing decisions about how you should draw income from the structure in place and where excess capital should be held.

Q2. When it comes to cash flow, what systems can a small business owner put in place for success?

A2. Every business is different and will require more or less control of the cash flow issue depending on the complexity of the business. Overall, don’t leave yourself tight and make sure you have alternate sources of capital to assist when the unexpected happens. Your bookkeeping function could be in-house or you might have someone come in periodically but either way, you need access to information to suit your circumstances and rely on your accountant to assist with some cash flow projections.

Q3. Where can small business owners save money when it comes to financial planning?

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A3. Saving money often emanates from getting proper advice that may initially cost you but will often lead to you making better decisions about your business and wealth. Complete some self-study so you know the right questions to ask your advisors and make sure you take a basic accounting course if you didn’t do so before starting your business. Always explore where there may be some pricing synergies through participating in multiple products.

Q4. When it comes to insuring your small business, what surprises small business owners the most when it comes to coverage considerations?

A4. If a business owner was previously an employee, they may be surprised at the cost of things like employee benefits so it is important to study the range of options available so you can build these things into your budget in an affordable way.

There are a range of products applicable to the small business owner in both the Property & Casualty and Life and Health areas of insurance. Understand the various applications for using insurance in your business and then prioritize each item.

Q5. How often should small business owners be reviewing and updating their financial plan?

A5. Your Financial Plans should certainly be reviewed annually and typically people may recast their overall plan every 3 years or so depending on whether any major changes have occurred or not.