Owning and running a profitable business is a dream shared by many. Unfortunately, only 56 percent of startups actually make it past their first five years.
The top reason is likely financial troubles. Running a business means needing to manage the small business finances that are involved.
Luckily, it’s not hopeless. There are steps you can take to help manage your finances and give your business more of a chance at surviving and thriving.
If you’re interested in learning more about managing your business finances, then keep reading.
Approach Your Small Business Finances Strategically
You need to have a clear understanding of your current company finances –how much money you have coming in, what your fixed and variable expenses are, and what your business debts are. Once you have this information, you can start to develop a financial plan that will help you reach your short-term and long-term financial goals.
Creating a budget and reviewing it regularly will help you track your income and expenses so that you can see where your money is going each month.
Separate Your Personal and Business Finances
To monitor your income and expenses and make it easier to file taxes, open a business bank account. You should also get a business credit card, which will help you build business credit.
Keep track of your personal finances. Be sure to budget for your living expenses and set aside money for personal savings and investments. By keeping your finances separate, you’ll also protect your personal property and assets and know which taxes will be applicable for which.
For more information about a business bank account, check them out.
Understand Your Cash Flow
Oversee your business finances using accounting software like QuickBooks or Xero, or you can keep manual records using a spreadsheet or ledger book. Whichever method you choose, be sure to update your records on a regular basis, at least once a month.
Regularly monitoring and understanding your cash flow is essential for money management in your small business. Tracking your income and expenses gives you a clear picture of where your money is going.
Be Mindful of Taxes
As a small business owner, you are responsible for paying taxes on your business income. Set aside money each month to cover your taxes. Make sure you know what deductions you can and can’t claim and take advantage of any and all tax breaks that you are eligible for.
Stay on top of your tax payments.
Seek Professional Help When Needed
A professional can help you set up a budget, track your income and expenses, and offer advice on how to best use your resources. They can be very useful in identifying and solving financial problems, as well as providing guidance on financial planning and management.
Take Control of Your Finances
For your business to survive past the five-year mark, managing your small business finances must become a fundamental part of your strategy. By following these tips, you can take control of your finances and safeguard your business against financial difficulties.
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