If you own a small business or are thinking of starting your own venture, get ready. You are about to do some serious homework.
Small business owners often take on many different hats within their companies. Sometimes they have to balance leading the company with other essential operational duties. Other times they are deep in the trenches dealing with customers. Sometimes they even take on the tedious work of office cleanup.
Most importantly, they are the financial leader in the business. Even if you aren’t an expert in business finance, you can find success. Check out this financial advice for small business owners to help you take control of your company’s financial plan.
Maintain a Balance Between Your Business and Personal Goals
The first thing you need to realize as a small business owner is that you’ve got to balance your business dreams with your personal goals. If you have a family, you should bring your loved ones into the conversation about goals for the future.
Running a small business is more than a full-time job. Some small business owners focus on building the company and working ridiculous hours without any plan to slow down. Think about what you want to achieve out of your life and with your small business.
Understand Small Business Taxes
Next, every small business owner must face the realities of small business taxes. This is an essential part of small business financial management.
When you make the transition from employee to employer, you end up taking on a lot of the taxes yourself. Don’t let yourself be overwhelmed with the confusing labyrinth of employment taxes, sales tax, and other payments.
In this situation, it may be best to consult a professional accountant to help. Messing up your small business taxes can be a costly and stressful situation that could give you some serious headaches. But, if you start off on the right foot, you can learn the routine and understand your financial responsibilities.
Include Yourself on the Payroll
When you’re putting so much time and energy into building a business, you may neglect something very important, your paycheck. Don’t be a martyr for your business. Take control of your personal finances and set yourself up with a regular paycheck from the business’ proceeds.
While it may make sense to start off small with your own paycheck, be sure to adjust over time. Avoid sacrificing your own personal wealth for the success of others.
Have a System for Controlling Costs and Debt
Your business’ health also depends on how well you control spending and new debt. You have to be on top of all of your expenses from the business.
Make it easier for yourself to record expenses and costs by tracking as much as possible with accounting apps and online tools. Use a company credit card specifically for the business to charge expenses related to operating. When necessary, you’ll need to finance certain things such as equipment, new products or property.
Just like a personal loan, weigh the pros and cons of taking on new debt. Make sure your revenue can handle the monthly payments before committing.
Keep Up With Capital Demands
Besides costs and debt, your business’ financial plan should also consider your needs for capital each month. Your company’s health depends on having enough cash each month to cover recurring costs. These costs may include maintaining payroll, rent, utilities, inventory and much more. Your monthly revenue should get to the point where these regular expenses are taken care of. If not, it’s time to reassess your business plan and structure.
Save for Retirement
Small business owners may feel like they’ll never get time away from their company. But there will be a day where you will ride off into the sunset into retirement. Unfortunately, many over-involved small business owners neglect to address the subject of retirement.
Instead of hiding your head in the sand and avoiding the inevitable, it’s best to make a plan. Talk to a financial advisor to figure out how much you can start saving for your future. This can help you determine how much money to set aside each month and what type of self-employed retirement plan is best for you.
Develop a Plan for Your Future
The last important tip for your business’ financial future is about succession. There will be one day when you will be ready to either retire or move on from the business. You need to come up with a plan for your business after you leave.
Some family businesses get passed on to the owner’s children. Other businesses grow and end up getting sold to the highest bidder. This could leave the owner with a lucrative walk-away offer. Many businesses fold after the owner leaves, making all of that effort and time a waste. Don’t leave your business’ future up to chance. Design a plan for succession that honors your hard work.
Learning the ins and out of financial planning tips for business owners is vital for your company’s well being. Your hours of hard work, dedication, dreaming and taking on many different jobs can help lead to financial success.
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MileIQ’s blog does not constitute professional tax advice. You should contact your own tax professional to discuss your situation.