There are always risks involved with being in business; how owners manage these risks often determines their long-term sustainability and profitability. There are many factors to consider when assessing and guarding against these risks, thus, being proactive in managing them is wise. In an effort to help, let’s discuss 3 areas where risk management is essential for small businesses.
#1. Insurance Coverage:
This is often the first area owners think about when considering business risks. There are good reasons for this, as: accidents, untimely deaths, litigation, asset losses, sicknesses, damages, disasters, thefts, and other unforeseen occurrences can and do occur to businesses everyday. Business liability insurance is an essential part of being in business, even for businesses without a physical storefront or employees.
Small business owners may not have the time or the ability to understand the fine print in their insurance contracts, therefor, may not have the proper coverage for their specific needs. Insurance agents are helpful to an extent, yet a financial planner (CFO) will bring the business’s finances into the insurance equation.
For example, Chandler & Knowles CPAs can help small businesses assess which areas of their business are at risk the most, by understanding the nature of their: future growth projections, cash flow, products, and services. Also, our unbiased view will help owners reduce or eliminate superfluous coverage, while adding coverage in areas of high risk (key employee life insurance, asset protection, disability insurance, buy-sell agreements, litigation, etc.).
#2. Taxes and Compliance:
Paying taxes and staying in compliance to business laws, codes, and regulations, are all tasks small businesses have to deal with. Managing the risks in this area will prove to be very important for long-term sustainability and profitability. Getting audited or being fined for non-compliance can be just as harmful as an unforeseen accident.
The more common risk for small businesses is inefficiently filing taxes, which often leads to a loss of income or an audit. Tax planning, preparation, and filing, are best completed by someone who understands the intricacies of the business’s finances and goals.
Thousands of dollars can be saved with slight adjustments in filing, operations, structuring, and planning. An end of the year tax preparer, that doesn’t have a working knowledge of the business’s finances, won’t be able to provide the in-depth risk management needed when it comes to taxes and compliance.
Chandler & Knowles CPAs tax planning and preparation services can help mitigate tax overpayments and non-compliance issues, thus, effectively manage the risk of tax and compliance issues for small businesses.
#3. Project and Financial Planning:
Without a dedicated CFO, many small businesses don’t have the leadership necessary to manage the risks associated with projects and financial planning. Owners and project managers will benefit by having a comprehensive view of the business’s finances and the risks involved with projects. These clearly defined risks will determine the scale and type of projects and planning undertaken.
Many small businesses over-extend themselves with projects, putting themselves at risk for loss if one unforeseen incident occurs, such as: a partner falls through, assets are lost or damaged, or cash flow is interrupted for an extended period of time. These project or financial planning failures can lead to: high interest loans, liquidation, or business failure.
To avoid the risk of project and financial planning failure, small businesses can work with Chandler & Knowles CPAs to comprehensively assess the risks involved with each project, in order to move forward with only those that are financially viable. In other words, small businesses can outsource their CFO to gain financial planning and risk management expertise with projects.
There are risks involved in all areas of business, which means risk management is essential for a small business’s sustainability and profitability. Business insurance is most commonly associated with mitigating risks, yet: tax planning and preparation, compliance issues, project execution, and financial planning – all require the effective management of risks as well.
Many times, small businesses have limited resources and expertise to deal with these 3 areas that need effective risk management. By partnering with Chandler & Knowles CPAs, small businesses will gain a partner that has the experience, expertise, and tools to properly manage these risks and ensure sustainability and profitability long-term. If interested in learning more please contact us today.