Smart Money Moves for the Small Business Owner
Posted by : Premraj | Posted on : Friday, April 11, 2014
DELICIOUS
SU
REDDITOwning a small business is the dream of many, but few take the leap because it is not easy. There is lots of hard work and lots of risk. If you have made the leap, congratulations on following your dream; you have a lot to learn. Ultimately mistakes will be made, and experience will be your best teacher. But, there is plenty you can do to hopefully shorten the learning curve, and minimize problems. One particular area you want to read up on plenty is finances.
You want to do all you can to properly separate your personal and business finances, minimize expenses, promote healthy cash flow and spend wisely in all aspects of your life, whether related to your business or your personal life. Here are a few helpful tips to get things off on the right foot, financially speaking.
Good Strategies for Keeping Money Separate
When you run your own small business, it is all too easy to co-mingle personal and business funds; to minimize any issues that may arise, it is a good idea to adopt strategies to keep the money separate.
First and foremost, open separate accounts. Not only will this make separating money extremely simple, it will help tons when it comes time for tax season, and you need to figure out income and expenses. If all your money is lumped together in one account, teasing out this information can be quite tedious and time-consuming.
Officially incorporating your business is another smart move. Setting up an LLC or S-Corp will offer protection for your personal finances in the event of bankruptcy, lawsuits, insurance claims against your business or one of the many other potential financial issues that could put your personal assets at risk. If you are not sure what type of business structure is best, consult with knowledgeable professionals, like a CPA or an attorney.
Don’t Go on a Spending Frenzy When You First Start
It takes money to make money—that’s for sure. But, many new business owners make the mistake of spending unnecessarily at the beginning. You will not be turning a profit right away, and you must have enough money to not only run your business, but take care of your personal financial obligations, like mortgages and car payments. Throwing as much money at a business as possible does not ensure it will grow any more quickly, so be smart about spending.
Carefully consider each purchase before making it. Is it absolutely necessary at this juncture? In some instances, an equipment lease may be the smarter move, rather than buying a brand new computer for each employee, or outfitting your new restaurant with all brand-new appliances. At first, it may make more sense to hire independent contractors rather than regular staff whom are getting paid that salary or hourly wage no matter much or little they have to do at any given moment. If you could work out of your home for now, no need to lay out money for a lease and furnishings.
Consult with Financial Professionals
When trying to be fiscally responsible, there may be a temptation to try and do lots of things yourself that may be better left to the professionals. Sure, there are programs to help you do taxes, or budget. But, smart business owners know the value of consulting with people who know more than they do. Working with an account can maximize your profits, and help you manage your business and personal finances most effectively. If you are having trouble making sense of financial statements, or your cash flow is all choked up, a financial advisor can offer helpful strategies to improve your finances over the long-term.
These three tips can go a long way in helping you achieve financial success and managing your money smartly.
Separate accounts not only keeps your money organized for tax season, but it enables you to take advantage of all of your deductions. If purchases are made on a personal account, they can’t be deducted as a business expense – which can save the company a little money when it comes time to file.