4 Strategies to Improve Your Business’s Financial Health

March 17, 2023
4 Strategies to Improve Your Business’s Financial Health

By Gabriel Otero, CPA and Financial Planner at Popular

Making sure your business is in good financial health is key for materializing your plans and successfully dealing with potential setbacks. These four strategies will give your company the boost it needs.

During the first months of the year, we make personal resolutions, analyze our past goals’ progress, and even set new ones. There’s nothing like the feeling of starting from scratch. But we rarely make this kind of assessment regarding our business. Have you asked yourself: What am I doing right? Is everything in order? What still needs improving in your business’ operations?

Here are some considerations to assess when measuring the progress of your business’s financial health:

  1. Is your business headed in the right direction? – Identify if your business is registered under the correct legal entity. Reexamine legal and tax formalities. Consider:
  • What does your business do?
  • Do you pay taxes at an individual or entity level?
  • Must you file monthly, quarterly, or annual reports?
  • Are there other partners?
  • What legal responsibility do you want to have as an owner?
  1. Is everything “set”? – Although your business’s finances are separate from yours, the company’s financial health has a significant impact on your networth. Not only due to the income it can generate, but because the business could be your most valuable asset. Looking at things from an asset protection and preservation standpoint. Consider that your business can be part of an estate.
  • Have an emergency fund that covers at least six months’ worth of your business’s expenses.
  • Review your financial statement: Are you familiar with all assets and debts? Are you maximizing your money investment/performance? Would refinancing a debt be convenient? Should you separate the real estate from the business’s operations?
  • Determine what is your business’s financial capability to apply for credit.
  • Identify the type of income your business receives, the outstanding debts receivable, and which expenses can be capitalized or deducted.
  • Collect and record all accounting documentation generated.
  • Reconcile bank statements with your business’s books every month.
  • Comply with the tax return and reports filing required by the federal, state and/or municipal government.
  • Establish a succession plan for your business, whether you are going to transfer it on life or on death..
  1. Determine your strategy – Be aware of the risks to which the business or you (as an owner) are exposed. This will help you protect your assets properly. Review what strategy you will adopt to manage each risk: if you’re going to assume it, avoid it, reduce it, or transfer it. Ask yourself:
  • What are the risks to which you and the business are exposed?
  • Are there any key employees who, should they resign, their departure could financially affect the company?
  • Are your insurance policies up to date?
  • Is your business succession plan tied to your estate planning?
  1. Reduce or avoid the impact – How is your tax planning? The point is to develop legal tools to reduce the tax impact. You may need to integrate or consult a legal and/or tax advisor for these purposes.
  • Determine which expenses can help reduce your Adjusted Gross Income.
  • Establish a qualified retirement plan and maximize your contributions.
  • Check if your business is part of an industry that could qualify to receive tax incentives.
  • Reduce payroll contributions by increasing fringe benefits as part of employee compensation.
  • Review and make sure you understand what types of income the business receives so you can learn how to maximize them.

Yes, all these considerations take time and effort, but they will give you peace of mind. Complying with everything at the same time will help you achieve financial security and independence; remember that one is tied to the other.

At Popular, we care about your business’s financial health. Call Popular One financial planning team at 787-281-7272, Monday to Friday, from 8:00 a.m. to 5:00 p.m. You can also write to popularone@popular.com or visit popular.com/en/popularone/contact-us to schedule an appointment.  We are always ready to help you!

Popular Risk Services, LLC is an Insurance Producer duly authorized by the Office of the Insurance Commissioner to manage life, disability, miscellaneous, title, health, and variable insurance business in Puerto Rico.  Insurance products are not insured by the FDIC or other government agencies. They are not deposits or obligations, nor are they guaranteed by, Banco Popular de Puerto Rico or its subsidiaries or affiliates. Some insurance policies may lose value. Popular Risk Services, LLC is a subsidiary of Popular, Inc. and an affiliate of Banco Popular.

The information and general descriptions contained in this article are designed to help you understand about the factors that you should generally consider when measuring the progress of your business’s financial health. Any descriptions herein are solely for informational and educational purposes and for your independent consideration; they are not intended to be regarded or construed as advice or a suggestion for you to take (or refrain from taking) a particular course of action. In providing this information, we assume that you are capable of evaluating the information and general descriptions contained herein and exercising your independent judgment. This document was prepared for informational purposes only and should not be considered as an advice of any kind. Banco Popular de Puerto Rico, its subsidiaries and/or affiliates are not engaged in rendering legal, accounting, or tax advice. Should legal, accounting, or tax advice be required, the services of a competent professional should be sought.