If you want to see your business flourish, you need to be good at financial management. However, during the early days of their business, owners often have a hard time managing their finances. It happens primarily due to the lack of experience. If you are confronted by a similar problem, here are some actionable tips for managing small business finances.
Educate yourself
The first step towards managing small business finances is educating yourself. For instance, you must learn how to read and interpret the financial statements of your business. There are three primary financial statements to consider here. These include the cash flow statement, the income statement, and the balance sheet. As the name suggests, the cash flow statement shows where the money came from and where it went. The balance sheet provides a detailed overview of assets, liabilities, and capital. On the other hand, the income statement draws a complete picture of the revenue generated in the past and the present. It also showcases your expenses and profitability.
Have a Separate Business Account
You should have separate business and personal accounts if you want to manage the finances of your small business in a responsible manner. Failing to do so can make financial management incredibly difficult. It can also lead to tax issues. Independent business accounts will help you paint a clear picture of expenses, profits, outlays, and other financial data. Moreover, you can transfer income portions into higher interest accounts used for generating equity that can be invested and used for paying taxes.
Make Sure to Pay Yourself
It isn't uncommon for business owners to not pay themselves when their business is in its nascent stages. This usually happens because you are bearing a lot of expenses and not generating enough income. However, one mustn't make the mistake of not paying themselves, even if it is not a substantial amount. Remember, you will never manage your business's finances if your financial condition isn't that great.
Be Good at Tax Planning
Tax planning can be challenging if you are new to doing business. However, taxes are a huge responsibility, and they must be paid on time for better financial management. When your tax plan is in place, it becomes easier to reduce taxes through increased savings and deductions, which helps you save a significant amount of money over time.
Try Becoming Audit-Proof
When you understand the audits your business will be subjected to, it becomes easier for you to be prepared for them. For example, the IRS audit isn't the only audit you go through. There are income tax audits, sales tax audits, and employment tax audits, to name a few. Besides knowing the different types of audits, you must also maintain receipts, invoices, and accounting data. By doing so, you will always be prepared for the audit that comes your way.
If you need more tips for managing small businesses, you have come to the right place. We help companies develop financial plans while enabling them to stay on top of their taxes. To benefit from our services, feel free to book an appointment today.