by Lisa Robinson
So You Started a Business… Now What?
Time to Take Charge of Your Business Finances!
You love Freedom! That is why you started your business. Your business is your passion, your baby. And even though your fortunate to work doing something you love, you still need to contend with that little pesky back-office tasks and financial bookkeeping.
Everything from sending out invoices to keeping up with those pesky taxes, maintaining smart financial practices can be very overwhelming and such an exhausting process. Yet keeping the finances in order is one of the most important things you can do for your business. So it is so important. Once you have developed a system, it will be easy to maintain and you’ll be well on your way to success.
Here are eight tips to get you well on your way:
1. Shelter your personal finances
No I don’t mean go and open an account in the Cayman Islands or anything like that. But you do need to shelter your personal assets and finances from any liabilities and risks of running a business. So if you haven’t done so already, form a LLC or incorporate your business in order to help protect your personal assets like your savings account, house, etc. should anything happen in your business.
2. Make sure you have separate business accounts
I do not know how much I can stress this. If you are still mixing your personal and business finances, stop! Fix it as soon as possible! Open a separate checking/savings/credit card account for your business. When you get a separate monthly statement for your business expenses and revenue each month, it will so much easier to understand how your business is doing and how well it is staying within budget and you meeting your financial goals.
3. Don’t get pinched at tax time
I see it time and time again, business owners, especially new ones, often get a nasty surprise come tax time, when they realize they’ve significantly underpaid on taxes for the year. When an employer isn’t automatically withholding federal and state taxes with each paycheck, it’s up to you to make sure you have it covered. One effective strategy is to put approximately 25% (or determine the appropriate percentage with your accountant) of each payment you receive into a separate account. Then you can draw from this account to make your estimated quarterly payments as needed.
4. Get an accounting system
A good accounting system will save you time and money in the long run. Work with an accountant, they can help you get into a system that works specifically for you and your business. If you don’t want to work with an accountant yet, then an app like Quickbooks Online, Zoho, or Xero Accounting can help or if you are just starting out and need to stay within budget a good app to start with is Wave Accounting (which is a free app). One of these softwares can help you keep everything organized.
No matter what software or system you use, make sure you know how much your business has taken in and how much your business spent on a monthly basis. By staying up to date on your revenue and expenses, you’ll have an easier time come tax season and will be able to make better financial tax planning decisions for the future.
5. Track your expenses!
This is so very important! When you don’t keep tabs on every business expense, you forfeit tax write-offs and pay more in taxes than you should. Keeping a credit card that’s used solely for business is a good starting point to ensuring that your office supplies and other business purchases are accounted for. Be sure to tie any service expenses – like web/email hosting – to the card (or whatever system you use). In addition, jot down business trips, mileage, lunches with clients, coffee dates, and other entertainment/travel expenses in an electronic or paper planner. Make an appointment with an accountant or a CPA if you’re unsure about what you can and can’t write off.
6. Make a weekly appointment with yourself
No matter how hectic things get, schedule a weekly appointment with yourself to focus on your business finances. You’ll want to make sure you’re caught up on any invoicing, have captured any new business expenses, paid any of your own outstanding invoices, and your books are up to date. When there’s room in your budget, you can always hire someone to take care of this for you.
7. Start accepting credit cards
A surefire way to increase your sales and get paid on time is to make it as easy as possible for your customers and clients to pay you. This is even true when you offer professional services. Look into a solution that caters to small businesses, like Square, PayPal Here, or Spark Pay. When choosing your provider, be sure to look closely at all the fees: swipe transaction, manual transaction, monthly, chargeback, and returns, so you are comparing apples with apples.
8. Get Strategic
Once you understand your business’ financials, it is time to put those numbers to work. Ask yourself the following questions: how sustainable is my business right now? Which clients or services bring in the most revenue? Which products have the best and worst margins? Then, you can determine if there are any changes needed to maximize profits and grow your business this year.
Lisa Robinson is CEO/Founder of Li$a Marie Accounting and has over 15 years of Accounting experience. She is your down to earth Sassy Southern Accountant who specializes in taking the Chaos out of Numbers and helping entrepreneurs get rid of the accounting headache. All the while showing her clients that Numbers don’t have to be scary but instead can by very Sexy!
She invests the time understanding you and your business to create a plan that will help your business grow and she is there with you every step of the way.