Financial Advice For All Small Businesses
Running a small business is not easy and if you are not in control of your finances this becomes much harder. The problem that many small business owners face is that they do not know where to start with their business finances. If you are one of these people, there is a lot of advice that you should consider which will help.
Regularly Review Your Business Finances
All businesses have a rhythmical pattern to their finances with some being seasonal and others due to project durations. This pattern of the finances is why you need to regularly review your finances. Monthly reviews are generally recommended as they will provide you with a better understanding of the pattern of your business. Reviewing the finances too often could lead to problems so weekly reviews should be kept to a minimum. Look at ways of saving your business money by streamlining different activities, information on print audits for example.
Maintain A Business Budget
The best way to keep on top of your finances is to have a budget and this is no different for a small business. You should make a budget on the first day of each month and you need to stick to this. You should also compare the budget to your actual finances at the end of each month to see where the discrepancies are.
When you first start your business, there are going to be differences between your budget and your actual finances. This will help you identify where you are spending and determine if your budget is accurate. Doing this will also help you determine if there are problems with your finances and expenses that are made which could have waited.
Save The Appropriate Amount For Tax
Each month you need to set aside money for your taxes and this money should not be touched. You can determine how much you save by calculating the amount of tax that you paid the previous year and holding the same back. A good rule to use is to set aside 90% of the taxes that you paid the previous year for this years taxes.
Proactively Reduce Your Debt
There are times when debt can be good for your business. Short-term debt can help the long-term growth and health of your business. However, the problem comes when you take on unnecessary debt which will only drain your business. If you do have business debt, you also need to work proactively to reduce it by making consistent payments. Paying more when you are able could also help to reduce the principal amount, but you need to ensure that you only use funds that your business can afford to do this.
Pay Yourself A Salary From The Business Earnings
You do not have to send yourself a payslip each month for your salary. However, you can pull money from your business account at set intervals for your personal income. Paying yourself a salary from your business earnings will force you to separate your business and personal income. You will also start to see the business as a separate entity which is very important.
There is a lot of advice that small business owners need to know about. Some of the advice may seem like common sense, but all of it will help you run a successful business.