I know that money is taboo for many people but if you want to survive in life….and in business, you need to take certain decisions that are vital for both your personal and business finances.
Here are 5 tips that can be used for your business. They will ease your life, I guarantee you!!!
1. Consider Your Business Structure
You probably opened your small business as a sole proprietor or as a partnership. As your business grows and profits, consider incorporating it as a limited liability company (LLC). Turning your business into its own legal entity makes it easier to open a business savings account, helps you save you money on taxes, and protects you from other financial risks. Talking with a certified public accountant (CPA) can help you determine if you need to make this change.
2. Keep Business Funds Separate from Personal Funds
Separating personal finances from business expenses is mandatory if your business is an established LLC; however, it is always a good practice for any type of small business. Separation of funds will help you stay organized, make managing taxes easier, and help you accurately track and record your financial records. It will also be easier if you ever decide to sell your business. You might consider opening a credit card for just business expenses, as well as separate business checking and savings accounts to help with money management. To make this process easier, apply for an Employer Identification Number (EIN), which is a tax number specific to your business. It’s available free on the IRS website. You’ll use this number when opening your checking and savings accounts, and it also provides you with a form of protection against identity theft.
3. Make an Appointment with Your Tax Advisor
No matter how organized a business owner you are, taxes can be tricky for everyone. Enlisting the aid of a CPA can help you assess the past year’s tax situation and estimate next year’s payments so you won’t be liable for underpayment penalties. A CPA can also help you avoid overpaying taxes and focus on a long-term tax payment plan. Before meeting with your CPA, gather all your records and expense reports, bring all your employees’ W-2 forms, and be prepared to discuss the details of your retirement or 401k plan. According to a Forbes article, business owners are usually in need of assistance when calculating deductions and a CPA can explain your options.
4. Invest in Accounting Software or Cloud-Based Apps
Consider investing in low-cost small business accounting software that is sufficient to cover your basic accounting needs and help you track expenses. Using software saves you time and frustration by helping you track important information such as income, produce expense reports, create invoices, generate receipts, and maintain client information and notes. Consider looking into mobile and cloud-based apps as another low-cost solution.
5. Analyze where to invest your time
Wearing every “hat” in your business may seem like an easy way to keep expenses low, but where you invest your time presents costs and value. Assess the miscellaneous tasks you handle, including those related to invoicing, bookkeeping, running sales reports, managing your inventory, facilities or marketing.
Analyze what you would pay a third party if you outsourced each specific task. Identify what’s truly providing cost efficiency, and what’s robbing you of the opportunity to invest your time and energy into more valuable businesses functions. When you do outsource, make sure the work fits the resource to ensure maximum return on investment.
For example, a bookkeeper will likely be more cost-efficient than paying a certified public accountant to handle your basic monthly financial needs; a freelance web developer will be more affordable and likely as capable to handle your one-off website needs compared to a web development firm.
Smart money management for your small business is relatively simple if you stay organized. Keep track of expenses and save receipts, especially in the first stages of your business. This will help you plan for the future, create more opportunities for investment and increased earning potential, and ensure the longevity of your business.
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