Don't Be One Of The Many Small Business Owners Tripped Up By Their Own FinancesTuesday, January 17, 2017
You’re in business to make money. Yes, you might have goals beyond profit and a love for the work you’re in. However, at the end of the day, if your business is bleeding money then you won’t get to reach any of those other goals. Yet, too many small business owners get into business without understanding how to really operate those finances. Here’s how you make sure you don’t make that mistake.
Even before the business begins, it’s a good idea to get as prepared for bookkeeping that’s as simple as possible. Your tax and other contributions all depend largely on the reliability of your bookkeeping. If you have many expenses to deal with in business, then it’s a good idea to start off by setting your business as a separate entity from yourself as a person. Having personal and business finances and expenditures tied together can make it very difficult to organize when tax season comes around. Accurate accounting of all incoming and outgoing money is essential for managing a cash flow plan, too.
Learn to Borrow Correctly
Record-keeping also shows that you’re using the money you borrow from investors and banks properly, too. When it comes to borrowing, you need to develop a more disciplined approach both inside and outside of the business. After all, getting in debt personally will put the business in danger too, as it will count as an asset of yours. Make sure that you have a reliable budget and plan for paying off any loan before you accept it.
Make Sure Your Money is Going Where it’s Supposed To
That budget shouldn’t only be used for paying debts, but making sure that you’re accounting for where your money goes as best as possible. It’s easy to find yourself spending more than you expected when it comes to taking on new projects in the business or making an attempt to expand. If you spend money you shouldn’t have, however, it can get you in real trouble. Especially if you’re spending money that should be going to any employees you have. If you have a larger workforce, then it might be a good idea to use payroll consultants to ensure they’re taken care of as soon as possible. You don’t want your forgetfulness jeopardizing the whole business.
Know Your Risks
Keeping your planned expenses degrees lower than the maximum you could allocate is a smart move for two reasons. For one, you might have those one-time costs we mentioned in the last point. Secondly, you might have to deal with a sudden risk to your finances that could otherwise cripple the business without an emergency fund ready to deploy. Insurance can help you deal with injury and equipment damage, but you should always have a secure layer of funding to insulate the business from risk as much as possible.
It’s all too easy to lose control of your finances, or to miss those vital expenses that you could put you in legal trouble as well as financial. Always keep the points above in mind to stay safe with your money.