Owning and running a small business can be challenging. There are a million little things to take care of and lots of big things that cannot be ignored. We’ve brought together our 6 top tips to get your small-business finances organized. Follow these suggestions to gain peace-of-mind and to thrive in your business!
1. Keep a Separate Bank Account
Congratulations! Your business is making money. Now it’s time to separate your business and personal finances.
Why is it important to have separate accounts?
- You appear far more professional to clients and customers when they make a check out to your business name rather than your personal name
- It signals the IRS that you have a business rather than a hobby
- It makes doing your taxes much easier. Your personal and business transactions will already be separate.
- Should you be audited, providing a separate business statement and record provides a clear picture of your business finances.
- Mixing your finances may result in missed tax deductions, and it will certainly cost you precious time.
- It’s much easier to keep track of your expenses, cash flow, etc.
2. Protect Your Business – And Yourself
Did you know that establishing an LLC or an S-Corp allows you to separate your business identity and finances from your personal finances? This means that should a legal issue arise, your personal assets and property would not be liable. By protecting your business, you protect yourself.
3. Track Your Income and Audit Your Expenses
It’s important to know how much you make and how much you spend. There are many ways to track your income and expenses:
- Online or phone apps
- Invoicing or bookkeeping software
You can track your income and expenses daily, weekly, or monthly – whatever best suits you and your business. This is a great way to spot trouble areas in your finances.
4. Eliminate, or Cut Down, on Paper
There is nothing more unorganized than a giant stack of paper! Get rid of clutter by organizing and digitizing your important documents. Save documents digitally then store them. Some information can be kept on your computer or on a separate hard drive, while more important documents should be stored and protected by a third-party secure service.
Some documents cannot be stored digitally. Be sure to keep these in a well-organized, fire-proof filing cabinet.
5. Decide How You Will Accept Payments
There are now more ways than ever to received payments, and you want to make it as easy as possible for your customers to pay you. Do you accept credit cards in person? How about online? Does it make sense to set up a PayPal or Venmo account to receive payments? Do you need to be able to accept payments on-the-go directly from your phone? These are all things to consider. Compare and choose the option(s) that have the lowest fees and the most ease for you and your clientele.
6. Put Finance Meetings on Your Calendar
Many people are reluctant to look at the finances regularly, which only makes it more painful when they have to figure out what their financial situation is. Set a weekly meeting to go over your business finances. These meetings do not have to be long. In fact, they will likely shorten in length once you have a better idea of your financial situation. Once you have made weekly check-ins a habit, set up quarterly or bi-annual meetings with an accountant or tax professional to get an outside perspective on how your business is doing.