Five Easy Steps To Organize Your Small Business Finances
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;
·
Contracts;
·
Correspondence.
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.
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