Growing Your Business
8 Steps to Get Your Business Finances in Order
Whether you’re just starting to put up your own business or have been operating your own company for quite some time now, one of your primary goals should be to get your finances in order. Even if you have a lot of capital and your hitting your target revenues, you could be putting your business at stake if you are not financially savvy enough.
Here are the key steps to get your business finances in order:
Put up a separate bank account for your business.
No matter how small your business is – you’ve got to separate its funding from your personal money. Open a checking account. It’s easy and it’s the best thing to do. Inform your bank that the account is going to be for your business as the requirements and types of accounts available may be different from that of regular personal checking account.
Having a separate business account allows you to easily track and sort your expenses and deductions, which should greatly benefit you when the tax filing season comes. Speaking of taxes, you also want to create a tax savings account that will allow you to save up enough fund to pay your tax dues comes April. Ask your accountant about your tax rate. Then, take that percentage from every payment you receive and deposit it directly to your tax savings account. This will surely make your life so much easier. Plus, you can be sure that you will have the money you need when you need it.
Manage your debts.
It is common for businesses to incur loans. It allows you to expand your business, invest in more sales, spot more opportunities, and eventually grow your revenues. However, you have to make sure that you are keeping track of your debts and paying them on time. Whether it’s personal loans online, bank loans, or equipment loans, learn how to manage your debts properly to avoid penalties and interests.
Understand your taxes.
Taxes are part of life. As a business owner, your tax responsibilities vary, depending on where you plan to put up your business and the type or nature of your company. It may include federal, state, corporate and local taxes. If you have employees, you may also be subject to workers' compensation and insurances. Knowing about these expenses is important to keep your business finances in order. Otherwise, you may just end up facing costly penalties, fees, and interests. Worse, you could face legal charges too.
Track your expenses. Budget wisely
Just because you have a separate fund for your business doesn’t mean you should not track your expenses anymore. You could be spending so much on raw materials or equipment than what your business can earn and you may not know about it! Not being able to budget and track your expenses can mess with your cash flow. Worse, you could be missing out on your tax deductions if you don’t properly record all your transactions. You see, in taxes, every dollar you can save is a big deal!
Establish good bookkeeping practices
Speaking of keeping track of your cash flow, a good skill to master when you own a business is bookkeeping. Many entrepreneurs think that their business is too small to warrant records keeping. But no. It’s a basic task that can save your business! The sooner you’re able to establish this habit, the less likely you will suffer from unnecessary expenses, charges and penalties.
Invest on technology
If you don’t have time to manually enter your daily transactions into your business ledger, you may consider using an online tool or computer software. There are so many of them, some are even for free. If it’s just a small business, a basic accounting software will do just fine, even an Excel File.
Review your insurance coverage
We hope nothing but the best for our business. But of course, the reality is that mishaps can happen. There could be a storm, fire, accident and the like that could greatly impair your business operations. It is best to be prepared and the only way to do that is to get an insurance policy. If you already have one, do check if it has the protection you need. Take note that flood and disaster coverage isn’t always included in regular policies. Talk to your insurance provider to be sure that you have disaster coverage.
Do an annual review.
Lastly, have a look at where your money has come and gone from over the last 12 months. You will easily identify patterns, such as good practices that you should keep and habits that you should eliminate. It allows you to focus your efforts on what worked and what you need to cut back on.
One of the secrets to the success of every business starts with financial organization. There are so many benefits to it. First of all, it gives you a clear understanding of where your finances are going, ensure that all your financial obligations are met on time, spot opportunities to further grow your money, lower risks, and ultimately grow your business. Whatever industry you’re in, it is important to keep abreast of what’s going in and out of your business, especially when it comes to finances. You need not be a financial expert to be on top of the game. With these key steps, you can surely get your finances in order.
Lidia Staron is a part of Content and Marketing team at OpenLoans.com. She contributes articles about the role of finance in the strategic-planning and decision-making process. You can find really professional insights in her writings.
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