We enjoy posting articles from other sources and here is one regarding Tips For Managing Finances As A New Business Owner from Jim McKinley, a retired banker with about 30 years of experience. Please check out his blog where he shares his advice and other resources on a variety of financial topics.
Opinions and tips from guest authors are not necessarily the opinions or recommendations of Hodge Group LLC.
If you’re looking for an accountant in Chigaco who can offer his expertise with startups, Tom Hodge can help. You can connect with him today by calling (773) 237-6369.
Image courtesy of Pexels
Tips For Managing Finances As A New Business Owner
One of the most stressful challenges that business owners face is managing the finances of their business. As a new business owner, it’s common to feel overwhelmed. There are so many details that you have to keep track of. You have to manage payroll and invoicing deadlines, stay organized for tax season, know how much money you’re spending, and how much employees are supposed to be paid.
This is a lot to tackle, even when it’s just a startup. It’s quite the juggling act. However, managing your finances is absolutely essential to the health and growth of your business.
Create a budget
One of the first things you should do as a new business owner is create a budget for your business. A budget doesn’t need to be incredibly detailed, and it should be somewhat flexible in case anything changes. According to professional bookkeeping service Bench.co, your budget needs to include your estimated revenue, fixed costs, variable costs, one-off costs, and profit.
As a business owner, your goal is to make sure your business always has positive cash flow, meaning more money is coming in versus going out. Because of this, having a strong grasp of your budget is important. To make things easier, you could consider using budgeting software, like Scoro, Centage, or Prophix, which are great for businesses of all sizes.
Stay on top of taxes
Keeping track of tax deadlines is extremely important. If you don’t file and pay your taxes by the deadline, you will face penalties and interest on the taxes due. You could lose your tax refund, or worse, you could even lose your property or face jail time. While this usually only happens in more serious cases, it is a possibility. Even though you can file for an extension, it’s still a hassle, and you don’t want to risk being too late.
Make tax organization and prep a part of your business plan. You might even consider paying taxes quarterly, so, you don’t end up with a lump sum needing to be paid. You should keep track of how much you will need to pay so it isn’t a surprise when the time comes.
Form an LLC
If you haven’t already, forming an LLC can make handling your business’s finances much easier. Not only will turning your business into an LLC make it more official, but it also provides the opportunity to separate your business and personal finances. Also, an LLC provides limited liability, meaning that if someone sues your business, your personal finances won’t be affected.
In addition, an LLC requires much less paperwork than a corporation and gives you tax advantages. SmartAsset notes that one of the main tax benefits is something called pass-through. This is where an LLC’s profits can be passed straight to the owner of the business without having corporate federal taxes deducted first.
Keep in mind that states have different rules for anyone forming an LLC. Make sure you know what your state’s regulations are before moving forward. To make the process a little easier, you can use an online formation service.
Hire an accountant
While you certainly could manage your own accounting and bookkeeping, by working with a trusted accountant, you will be in a better position to meet tax deadlines, and you’ll have someone in your corner who can navigate changing tax laws and help you maximize your deductions. Plus, your accountant can help you make financial decisions and keep you informed on the health of your business.
As a new business owner, there are a few things you can do to make managing your finances even easier. Create a budget, stay on top of taxes, form an LLC, and hire an accountant to help. If you follow these tips, you’ll find that you worry less about the financial side of the business, and you can enjoy doing more of what you love.
Jim is a retired banker with almost 30 years of experience. He created Money with Jim to share his advice and other resources on a variety of financial topics.
Jim McKinley