3 Reasons Why You Should Consider a Business Finance Coach for Your Small Business in the Philippines
Starting a small business can be exciting as this opens new opportunities for first-time entrepreneurs that wish to establish a business of their own. However, this can also mean adhering to various corporate responsibilities such as taxes, finances, revenues, etc.
Now that the year is ending, small enterprises may reflect and see that they have more room for improvement in their financial situation. That said, seeking help from an expert can place you at an advantage to help set a clearer business finance plan. To help you, this article will discuss the benefits of acquiring a business finance coach to stabilize and organize everything you need to know about business finances.
What is a Business Finance Coach?
A business finance coach provides entrepreneurs financial management assistance in various aspects of their business, such as managing their business finances, monitoring their success rate, managing cash flow, and helping you achieve your business goals.
The point of seeking a business finance coach is to guide you through the proper approach to managing your business finances. Doing so enables you to maximize your cash flow while ensuring that all aspects of your business are fully covered or funded with little-to-no compromise.
#1 Optimal Financial Management
A part of starting a business is to ensure that your finances are up-to-date and on track. Staying on top of your business financial flow can help you check on aspects such as investment, long-range vision, liquidation, revenues, profit, etc.
There are two classifications of financial management:
- Strategic Financial Management. Strategic Financial Management focuses on financial planning and analysis, visioning activities, spotting opportunities, data to align with future investments, etc.
- Tactical Financial Management. On the other hand, tactical financial management concentrates on transactions and comparing actual spending to what is budgeted to make sure it meets the auditor and tax requirements.
Aside from the two classifications of financial management, there are also three types of financial management that will further explain how small business owners can handle their finances properly:
- Capital Budgeting. Capital budgeting points out what is needed to be done for the company to reach its goals. It also identifies where the capital needs to go to support its growth.
- Capital Structure. This strategy decides how to finance business operations in order to reach maximum growth. An establishment may sell real estate assets to fund the enterprise.
- Working Capital Management. This management ensures that cash within your business is sufficient for operation materials and daily company expenses.
Depending on the size of your business, it may take months or even years before you receive your Return of Investment (ROI). That said, small business owners need to spend their finances wisely for their business to avoid running into difficulties with their business operations.
#2 In-Depth Understanding of Corporate Taxes
In the Philippines, both large corporations and micro, small, and medium-sized (MSMEs) must comply with Philippine laws’ current tax laws. Being knowledgeable about taxes is essential to help entrepreneurs be aware of the payments they must accomplish with government agencies such as Year-End Tax Compliance with the Bureau of Internal Revenue (BIR).
A business finance coach can help guide you through the necessary taxes your business may need to secure during the said tax laws. Generally, companies must comply with the following taxes:
- Capital Gains Tax (CG). CG is imposed on the earnings of an asset when it is sold. The capital gains tax will not imply any unsold investments.
- Documentary Stamp Tax (DST). DST is for the necessary documents, instruments, loan agreements, and papers evidencing the acceptance, assignment, sale, or transfer of an obligation, rights, or property incident.
- Income Tax (IT). IT depends on your annual profit that will emerge from property, profession, trades, offices, or as a tax on a person’s income, payments, profits, etc.
- Percentage Tax (ST). ST is being imposed on people and businesses that sell goods, leases properties, offer services in the course of trade, or an entity whose annual gross income does not exceed ₱550,000 and is not VAT registered.
- Value-Added Tax (VAT). This tax is collected from the merchant during a trade or business on every sale of properties, lease of goods, or properties or service dealers. VAT is also an indirect tax and can be passed on to consumers.
- Excise Tax (XS). An excise tax applies to those goods manufactured in the Philippines for domestic consumption and imported goods.
- Local Business Tax (LBT). LBT are taxes imposed by the local government unit (LGU) that is based on gross sales or gross receipts of the previous fiscal year.
- Real Property Tax (RPT). LGUs require establishments to pay for RPT on buildings, land, machinery, etc.
Having a good knowledge of corporate taxes applicable to your business enables you to plan and use your finances wisely and confidently. These taxes will also help you secure good standing with the necessary government agencies in the Philippines while ensuring that your business is fully compliant with current laws.
#3 Help You Create A Robust Business Financial Plan
Creating a business financial plan can be beneficial for your small business as this sets goals to achieve and help assess your business environment, resource budget, and so on.
Financial plans can help you follow a clear path to where and how your want your business to grow in the near future. Business financial plans will also enable you to keep track and make room for the following aspects of your finances:
- Cash Flow Management. Keeping track of your cash flow is essential to ensure that your expenses are maximized for your business operations. Managing cash flow will help you with smarter spending to make the most of your revenues, such as paying taxes, business expenditures, salary, and so on.
- Budget Allocation. After having a clearer understanding of the funds you have to disburse, the next thing you need to know is how to use your finances wisely. Proper budget allocation can help you determine which parts of your establishment need funding, such as resources, legal fees, rent, etc.
- Cost Reduction. Having a financial plan helps you determine which of your expenses you can reduce or remove altogether to create more room for cost-effective measures. Reducing your company expenses while maximizing processes can lead to savings that can help you with future expenditures.
- Risk Alleviation. It is essential that you include a budget for certain business risks such as inefficiency losses, unexpected expenses, business insurance, etc. Contingency plans are a must to avoid abrupt bankruptcy.
- Clear Company Goals. Having clear goals and objectives helps entrepreneurs stay on track on how they want their company to grow. Drafting a clear business financial plan can help provide clear objectives that can overcome unforeseen roadblocks in the future.
Creating a financial business plan is essential as this helps entrepreneurs visualize a better course of action on how to run their enterprises and better the chances of expanding their businesses.
Moreover, having a concrete plan makes you ready for unseen obstacles as it predicts risks that you may come across. This can also decrease unnecessary spending that can lead your business to bankruptcy.
Maximize Your Finances for Your Small Business in the Philippines
When starting a business, many things should be considered such as financial management, taxes, business plans, concrete objectives, etc. A business finance coach can help you create goals and financial strategies to increase your chances of having a prosperous business.
Financial management can be complex to new business owners who are just starting to learn about the business culture as it tackles learning about taxes and creating a business financial plan. Ensuring proper financial management benefits your small business as this helps turn your efforts and investment into a fruitful and practical profit. If you need a deeper understanding of how to manage business finances, you may seek help from tax, accounting, and bookeeping firms to help you handle your finances better.
Optimize Your Business Finances with a Finance Coach
With our large pool of certified public accountants (CPA), our team is dedicated to helping you manage your business finances.