If you are worried about dealing with your finances in your small business, don’t worry.
Accounting is one of the areas many business owners struggle with, but there are simple approaches to overcome your fears.
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Tackle Bookkeeping First
Looking at your sales is important but you also need to know your profitability. Keep your receipts in order and determine that you are making enough profit to cover the margins.
Use a software that is user-friendly and reliable, and spend some time becoming comfortable using all of its features.
Keep Business and Personal Expenses Separate
It can be tempting to combine your personal and business expenses, especially when you are in a pinch. However, it is necessary to keep the two accounts separate. They are not the same.
When you forget to keep them distinct, you can run into a lot of issues including overdrafts and even legal issues. There are specific rules regarding expense accounts for some business set-ups such as with an LLC. When it doubt, don’t do it.
Curb Unnecessary Spending
Once your business has started, it is vital to take it slow and only spend what you need to operate on a minimal basis. If you are in year one, you might not need to attend every conference in your field or have a luxury conference room.
Opt for a local networking group or hold meetings in a restaurant with a meeting room. Think about what you absolutely need to have to run your business and grow from there, slowly.
Know Which Tax Breaks Save You Money
There is a multitude of tax breaks that you can qualify for as a small business. Do you know what they are? Do you know how to maximize your deductions? Take advantage of everything you learn about. If you use a portion of your home for your business, you can deduct some of that cost.
If you need to travel for your work, you can also deduct things like gas costs and airplane tickets. This is an area where it is beneficial to use the knowledge of a practicing accountant to help you truly maximize these benefits.
Use the Credit Card
It isn’t very often that we hear, “Use your credit card,” however, your credit card does provide a good way for keeping track of spending and knowing where funds are being allocated.
Unlike cash, credit cards provide reporting that can integrate into your bookkeeping software for simple analysis. It is best to use just one credit card versus several, as one report and account is easier to manage.
Manage Accounts Receivables
Getting clients to pay is not always easy, especially when they continue to order services. It is great to see a large amount in the AR column, but know that the money isn’t yours until it is in your bank account. Be proactive about getting clients to pay. This means you might have to deny services until they become current.
People doing business professionally will not take it personally that you need your sales to keep your business running. This is also a good way to ensure your clients are meeting the standards you have set forth as well. Business is a two-way street.