You wear a lot of hats when you own a small business, and there is no doubt there is always a long list of to-do items.
Properly managed finances will keep you on track for success in your business and make sure you are hitting your goals. Depending on what those goals are, there are plenty of ways to organize your small business finances. Here are 6 steps we recommend:
Track Your Income
It’s important to know how much you make. You can track your income, monthly, weekly, or even daily so you can better understand how much money you’re bringing in.
Another benefit of tracking your income is that it allows you to monitor things better so you can determine if and how the numbers fluctuate. If you have a specific income goal, you’ll definitely want to start tracking your income regularly as well.
Using a bookkeeping service like BooXkeeping will help you keep your income organized.
Track and Audit Your Expenses
In addition to tracking your income, you will also need to track your expenses. Most business owners have a lot of important expenses that need to be paid to keep the business running.
You will be able to deduct a portion of your expenses on your taxes to lower your income. It will also lower the amount of money that hits your pocket. As a result, most business owners actually net a lower income than what they gross.
You can track your expenses the same way you track your income. Doing this will allow you to audit your expenses regularly as well so can make sure you’re not overspending on unnecessary costs.
A bookkeeping service like BooXkeeping will also help you keep your expenses organized.
Keep a Separate Bank Account
As soon as your business starts making money, you need to separate your finances. If you keep your personal and business finances together in one account, it will very quickly become unorganized and something you regret.
You can avoid this headache by simply opening a separate bank account for your business. If you have an EIN number, you can open up a business bank account, or you can just open a separate personal account and treat it like a business account.
Make sure all of your income is going into the business bank account and also pay all of your expenses from that account. Each month you will receive a statement to track your cash flow, and if you hire a bookkeeper, they will be able to focus on the income and expenses from this one account.
Protect Your Business
Each business requires its own level of protection, but you may want to consider getting some insurance or establishing an LLC or an S-Corp. Establishing an LLC or S-Corp allows you to separate your business identity and finances from your personal finances.
For example, if your business ever had any legal issues your personal property and assets will not be liable.
Consider How You’ll Receive Payments
You want to make receiving payments easy for customers who owe you money. To do that, you need to determine how you’ll accept payments. Making this choice depends on how your business works. If you’re providing a service, you may want to send invoices out regularly. If you sell products ad accept credit cards, you may want to set up a payment portal at your business.
Make sure to check the fees for different payment methods and weigh out what works best for you.
Digitize Your Business
It is easiest to stay organized if you keep your business digital. This is also best for security. You will want to make sure you keep the following:
- Accounting and bookkeeping records
- Bank records
- Contracts, including leases and purchase agreements
- Trademark applications and patents
- Permits and licenses
- Employee records
Schedule Regular Money Meetings
As a business owner, you should review your finances regularly. Income and expenses fluctuate, so it’s best to stay on top of things by reviewing and checking in often. Add a weekly or bi-weekly meeting to the calendar to review financial records and make sure you aren’t falling behind on things.
Businesses that lose track of finances risk letting debt creep up on them.