Money might not be the only thing that keeps you motivated to run your business, but there’s no denying it’s what keeps the lights on and the wheels turning. As such, even if you’re not as financially minded as you should be, as an entrepreneur, you still need to know how to get your money managed as soon as possible. Here, we’re going to look at the preparatory and organizational steps that can help you keep things running smoothly for much longer.
Make Sure Your Business and Personal Finances Aren’t the Same Thing
This is more often the case if you are running a sole proprietorship (and in fact, may be distinctly forbidden if you are running an LLC), but you should never let your personal and business finances get too muddled. For one, it can make it harder to track what expenses are business-related and which are more related to your own costs of living. Furthermore, it can be all too easy to dip into your business funds for your own personal purposes or vice versa if they’re not kept separate, so make sure you create a bank account specifically for the business.
Get Tracking It
It is essential that you take the time to track both your income and your spending to understand how much you have coming in and how much you have going out. There is plenty of small business accounting software that can help you quickly and easily start tracking it, often all you have to do is update it with the right figures. Make sure to audit your spending as well, so you understand how much of it, in percent, is going to what. This can help make it a lot easier to both find tax-deductible expenses as well as to reduce your expenses when you need to by focusing on which area you can reduce most easily, first.
Automate Expense Tracking
When it comes to your costs, there are some that are very easy to lose track of, which can affect how accurate your cash flow measurements are. We’re talking about the everyday expenses, from buying lunch for clients to filling up on office stationery to the costs that you accrue on the road when you’re on a business trip. You can use expense tracking apps to help you stay on top of these on the fly. However, it’s important to save what receipts you can so you can keep hard copy proof, as well as digitizing them so that you have records you can easily keep in your digital books, as well. You need to get into the habit of recognizing and tracking business expenses as soon as possible.
Track Your Invoices
If you take your payments through a merchant account or simply through cash, then you might not need to worry about tracking them beyond keeping accurate records of how much money you make. However, that’s not the case with invoices, which can begin to affect your cash flow if you lose track of them or allow them to become too late. Invoicing software can help you keep a birds-eye view on all pending and paid invoices, when they are due, and can even automate the process of sending out reminder letters or alerting you when an invoice is late. Don’t be afraid to apply late fees with invoices. If it’s going to cost you to wait, then the responsible party should take some of those costs, too.
Create and Sort Hard Copies
While many businesses might be going more and more paperless, there are some things that are important ot keep hard copies of. Make sure that you have enough secure storage space to keep your financial paperwork as best as possible. It’s wise to keep hard copies of bookkeeping records, bank statements, contracts and purchase agreements, and payroll records, from a financial perspective. Some other docs like trademark documents and permits are also worth keeping. Aside from having these documents in a secure physical location, you may also want to consider digitizing some copies and keeping them in a secure Cloud server so that you always have a backup at the ready.
Don’t Go It Alone
As an entrepreneur, you have to learn to wear a few different hats. This includes the financially informed hat. However, that doesn’t mean that you have to inherently have great financial sense. The right advisor can do a lot to help you make better decisions from the word go. Consider working with the accountants who specialize in SMBs, who can help you get your financial priorities in place and avoid many of the pitfalls that new business owners fall into. A good accountant does a lot more than balance your books, they can provide great advice for the organic situations that can so easily crop up when you’re trying to operate a business. Plus, they can be pretty vital for helping you create a real strategy when it comes to tax season.
Get ready for taxes in advance
Speaking of tax season, it’s far too common that businesses don’t have all of their paperwork in order until right before their tax returns are due. To put it simply, that’s too late and can result in mistakes that can lead to lengthy and time-consuming audits, or even simply paying more tax than you probably ought to be. An accountant can help you prepare your taxes as best as possible, but you need to understand how your taxes are paid and make sure that you’re putting together the paperwork you need throughout the year, rather than having to hunt it down all at once. Do your research on what you need for your taxes now, and have a folder containing all the tax information you need so you can add to it bit by bit through the year.
The sooner you get your finances organized and create the standards mentioned above, the sooner you can stop worrying quite as much about your money and make sure that you’re able to focus on running your business.