So you started a business in order to follow your passion?
And even though you’re fortunate to work at something you love, you still need to contend with pesky back-office tasks and financial bookkeeping.
From sending out invoices to keeping up with your taxes, maintaining smart financial practices can be an overwhelming and exhausting process, yet keeping the finances in order is one of the most important things you can do for your business. Once you have developed a system, it will be easy to maintain and you’ll be well on your way to success. Here are eight tips to get you started:
1. Shelter your personal finances
I’m not talking about opening an account in the Cayman Islands, but you need to shelter your personal assets and finances from any liabilities and risks of running a business. If you haven’t done so already, form an LLC or incorporate your business in order to help protect your personal assets (savings account, house, and other assets) should anything happen in your business.
2. Make sure you have separate business accounts
If you are still mixing any personal and business finances, you should fix that as soon as possible. Open a separate checking/savings/credit card account for your business. When you get a separate monthly statement for your business expenses and revenue each month, it will be that much easier to understand whether your business is staying within budget and meeting your financial goals.
3. Don’t get pinched at tax time
New business owners often get a nasty surprise come tax time, when they realize they’ve significantly underpaid on taxes for the year. When an employer isn’t automatically withholding federal and state taxes with each paycheck, it’s up to you to make sure you’ve got it covered. One effective strategy is to put approximately 25 percent (or determine the appropriate percentage with your CPA) of each payment you receive into a separate account. Then you can draw from this account to make your estimated quarterly payments as needed.
4. Get an accounting system
A good accounting system will save you time and money in the long term. If you are not working with an accountant, then an app like QuickBooks will be your best friend for keeping everything organized. No matter what software or system you use, make sure you know how much your business has taken in and spent on a monthly basis. By staying up to date on your revenue and expenses, you’ll have an easier time come tax season and will be able to make better financial and tax planning decisions for the future.
Here are eight tips to get you started: http://ow.ly/R03cs