Five Easy Steps To Organize Your Small Business Financesby Groshan Fabiola I try to cover as many topics as I can
When starting a new business, entrepreneurs have high expectations in terms of profits and durability of their new enterprise. Most of them are still working full-time jobs, as they get their businesses off the ground, and aspire to turn their small enterprises into a flourishing, profitable companies to which to dedicate their time, fully. While at the beginning the enterprise might be a side-job, you still want to make it successful. And for successful businesses, there is necessary a great organizational spirit, especially when it comes to their company’s finances. Below are some easy steps that will help you master the finances of your freshly-established business.
#1. Keep your personal finances safe
Yes, your business is small. However, think about the type of establishment you register, as you want to keep your personal assets safe. Consider an incorporated or an LLC. As you most certainly want your business to grow and become profitable, failure is a realistic expectation at the beginning. An incorporated or an LLC will keep your personal assets safe, protecting your business liabilities from mixing with your personal finances. Keep a clear head and don’t forget that while you may be hoping to turn your small business into a profitable one, there are still risks you have to protect your bank account from.
#2. Never mix business and personal accounts
When starting small, it’s easy to mix your personal bank account with the one opened for business purposes. You most likely have a savings account or personal use, but it would be advisable to set up one for business purposes as well. Setting up separate accounts for business purposes will allow you to keep track of your business’ expenditures, proceeds etc. Make sure to put in the savings account approximately quarter of each payment made for business purposes aside, in your savings account. At the end of the year, it will act perfectly as tax money.
#3. Keep track of your finances like big companies do
While it may be less expensive to have an accountant take care of your finances in the old-fashioned way, you still want to invest in software products for this purpose. Human error is surprisingly common when dealing with accounts, expenses and taxes in archaic fashions, and keeping old receipts in boxes and manually filling each transaction separately most likely endanger the integrity of your accounts. No matter how small and young your business is, do yourself a big favour and invest in an accounting/finances software product. Some programs are specifically developed for small businesses are incredibly affordable or are available free of any charges on the Internet. These systems are great, as they allow you to organize your finances, keep a close eye on expenditures and income, but also taxes.
#4. Never mess up your credit score – You may need a great one, at some point
Your credit history matters, especially if you look forward to accessing a financing line in the future. There are multiple centres that keep a history of user’s scores, that lenders use to determine how much an applicant is worthy of the credits they apply for. While credit score bureaus calculate user’s credit scores differently, there are five factors that matter when it comes to building a credit score.
· Your payment history – if you always pay your credits past due date, you must know that lenders will not be happy about that. This usually translates into a low credit score.
· The amounts owed – the amounts you have to pay to different lenders will influence your loan score.
· How many credit lines you have opened lately – the higher the number, the more likely you are to be identified as a high-risk client.
· Types of credit – if you have your credit through a loan, credit card or both.
While the factors above don’t matter in the same proportions, better try to build a low-risk credit score for both you and your company. Keep in mind that when first applying for a business loan, the lender will first have a look at your personal credit score. Thus, better keep that impeccable.
#5. Keep your company’s hard copies organized
Even if you invest in a smart accounting system, you will still need to keep hard copies of your receipts and paperwork. Like any other thing in life, everything becomes easier if you keep your copies organized. Create a system that will make everything easier for you and your employees. Separate files for separate matters seem to be the most suitable. This will make finding the needed document or receipt easier when you need those. To accomplish this, make an effort and invest in a file cabinet. Dedicate a separate section to separate parts of your business.
· Accounting and bookkeeping;
· Bank records;
· Marketing material – flyers, brochures etc.
· Licenses and permits;
· Standard forms;
· Employee records;
While keeping your company’s finances in order is not difficult, you have to be mindful of everything and keep all your records tidy and organized. Hire a reputable accountant. They will help you more than you initially think. Set aside 15 minutes with them to analyse your finances for the week, the general trend and ask for recommendations. They will offer you a better insight on where you are with your company and what you can do to improve your trajectory. They will be able to guide you in the right direction, at least financially.
Another amazing tip is to always keep a clean credit score. Remember that even checking with credit score offices too frequently might lower your score. This usually means that you want to access another credit line. Keep a clean loan record when it comes to yourself, and your company will most likely take advantage as well. Don’t forget to pay your monthly fees for the lines already opened in your name and remember that you can ask for your credit record once a year without damaging your credit score. Do it. Having a clearer idea on how your loan score is doing will help you in the long run.
Created on Jun 20th 2018 08:11. Viewed 125 times.