9 Tips for Planning and Maintaining Finances for Small Businesses
Being a small business owner is great as you get to make all the decisions. However, you are also the one responsible for the entire enterprise. Other than thinking about your product/service and the way you will market it, you also have to keep the financial aspect in mind. So, without further ado, here are nine tips for planning and maintaining your company’s finances.
Plan Your Budget
To make your business stable, you have to carefully work out your budget. You need to be aware of what you can afford for your business. If you go over the top in the beginning, you will not last long as a business owner. In case you’re taking out a loan to start the company, see where it’s best to invest that money. Should you buy or rent the necessary equipment? What about your office? Are you working from home? Take every expense you might encounter into consideration and plan your finances around that. Most importantly, make sure to stick to the budget.
A lot of the time, small business owners think that paying themselves is not essential, as long as the company is doing well. However, what happens if you’re forced to close the company and you have no money saved because you had no salary? Don’t make that mistake. Create a personal account and keep your business finances separate. Furthermore, create a retirement fund for yourself and get health coverage.
Save up for Emergencies
In addition to paying yourself, you have to create an emergency fund. There will definitely be some slow periods or setbacks, and you need to prepare for those on time. Set aside a certain amount of money every month and you’ll be able to deal with potential obstacles.
Invest in the Company
When you start saving money, maybe you come to a realization that you are doing incredibly well. However, before you use this money for anything, make sure it’s not a one-time fluke and that you are actually growing. The best way to use these new funds would be invested in the company. For instance, you can hire more people if you are expanding, you can update your equipment or invest in your further education.
Keep up with Your Books
In order to see how well you are doing though, you need to set enough time aside and look at your books. You can do it on a daily, weekly or monthly basis but it’s vital that you don’t forget this task. Hiring a bookkeeper can be very useful but if you’re trying to save some money in the beginning, you or any of your employees can learn the ins and outs of accounting and bookkeeping through online courses and potentially even become a certified expert in this field. By keeping a close eye on your books, you will see where you stand, what can be improved and whether you are leaking money somewhere.
Don’t Forget the Taxes
As a small business, something you cannot forget about is taxes. If you fail to file your taxes, you might lose your company or face criminal charges. To prevent this from happening, apply for a tax identification number and inform yourself about the types of taxes you have to pay. In case you cannot save enough for your quarterly tax payments, you can pay them monthly. Treat them like regular expenses you deal with on a monthly basis and you will not have to panic at the last minute.
Rely on Software
A great thing when it comes to dealing with finances is that you can now rely on software to help you out. Instead of managing your accounting manually, you can search for various programs that are available and you can even find some quality free ones if you know where to look. The right type of software can generate invoices, process payroll and import expenses from a photo of your receipts.
Leasing vs Buying Equipment
Equipping a business can be a challenge, especially if you’re working on a budget. That is when you need to decide whether you will purchase certain equipment or lease it. Depending on what you do, you need to consider the pros and cons of these two options. For instance, buying will cost you more upfront but leasing will cost more overall. On the other hand, when you choose to rent equipment, you will not be stuck with outdated models and you’ll be able to replace them with the latest versions as soon as the lease expires. Furthermore, decide just how important ownership of the equipment is to you.
Set up Good Habits
For your business to prosper and grow, you need to implement some good habits right from the start. Begin by establishing certain internal protocols as that can help you detect any problems early on. Furthermore, regularly set aside some time for going through all your financial statements to see how your business is doing. If you encounter any issues, it’s best to act as soon as possible and try to find a solution. In case you’re dealing with debt, work out a payment strategy so that you don’t fall behind.
As you can see, as a small business owner, there is a lot you can do on your own if you’re trying to save some money at the outset. Start by working out your budget and keeping an eye on the expenses. Don’t forget about taxes and look to the future of your company by implementing some good practices for success and prosperity.