It’s National Small Business Week, and what better way to celebrate than to think about bolstering the entrepreneurs’ personal financial success?
Let’s discuss the top three tips that small business owners should employ to procure financial success and security.
Meticulously mind your finances
First and foremost, small business owners should keep conscientious records of their finances. One of the most important numbers to keep track of? Your business’ actual cash flow. Tracking this information allows business owners to know exactly how much money is going in and out of their company, how much they can actually spend, and how much their business is actually worth. It is difficult to progress as a business if the financial foundation is rocky and precarious. Know what money you have and what you can do as a business owner by tracking your actual cash flow.
Don’t forget to keep diligent records of your spending in order to properly budget. Good budgeting cannot happen with loose and uncertain numbers. Good budgeting happens when business finances are tracked and tracked well. Consider looking into bookkeeping services or applications and software that help your small business stay on track; we recommend apps like Receipt Bank or software like Xero. Utilizing technology to your advantage when recording your finances will set your small business up for success.
Remember to save for tax time
Something that can easily slip from our minds throughout the year is preparing for tax time. It is imperative that you build a tax fund that’ll keep your business secure come March 15th. Even though business deductions might lower your tax bill, it is better to be safe than sorry. Set aside 35% of your business income for taxes. If you need it, great; you have it. If you don’t, great; you’ve got a good bonus come the end of tax season.
Plan for the future
In the same vein of preparing for tax time, it is important that entrepreneurs divide up their income for the future. There are many different ways to plan for the future, but we suggest starting funds for these three purposes: emergency, flexibility, and retirement.
Starting an emergency fund should be self-explanatory, but many people neglect to have one! There’s no magic number to what you should have in this account, but remember that there are lulls in everyday business. How are you going to pay your employees if your business hits a slow season? Employees and bills still need to get paid, so just like you should have an individual emergency fund, your business should have one, too.
Entrepreneurs know well that some months are much better than others, and for those months that your business does significantly better, consider a flexible fund. A flexible fund should take that extra money after you’ve already paid off your debts and paid into your other savings accounts (emergency, retirement, etc.) and put it away for a rainy day. Business needs ebb and flow, and having some money set aside that isn’t dedicated to a specific purpose gives your business the ability to be flexible and maneuver any unusual endeavors or situations that your company may come across.
Last but not least, make sure that you’re thinking about retirement. Not only should you think about funding your own retirement, but if you have employees, you should be thinking about theirs as well. It is never too early to think about the future, and putting aside money for retirement should be a top priority.
No one has ever said that running a small business is easy– especially regarding finances. Remember these three things, though, and you’ll find that finances aren’t as finicky if you plan ahead: meticulously mind your finances so that your business can maneuver anything that may come its way, save money for tax time so that you aren’t hit with a big bill and have nothing to pay it with, and plan well for the future by thinking about emergencies, the need for flexibility, and retirement. Keep all of these in mind and you’ll be well on your way to making your best business!
Happy National Small Business Week! Stay tuned weekly by liking us on Facebook. Need more tips on how to build a successful business? Get in touch with us and see how Xero can revolutionize your small business’ finances.