Starting your own business is a huge accomplishment and a huge responsibility. You are now held liable for managing not only your own personal finances but also those of your business. Keeping those two records separate is critical for financial success and tax purposes. Included here are a few tricks to employ when managing your business finances.
Use a Financial Management Computer Program
Having a handle on your cash flow and expenses is a great way to begin managing your financial budget. Consider purchasing a program that allows easy and concise management of business expenses and offers financial reconciliation. These programs are far more sophisticated than a simple Excel spreadsheet used at home and will greatly benefit the organization of the company.
Use Separate Accounts
While it is easy in the small business world to blend personal and business finances, keeping separate accounts will greatly benefit you in the long run. Consider having a separate checking account as well as separate credit cards for business and personal. It simplifies the process if you are audited and you will be more knowledgeable about your outflow of money.
Give Yourself a Salary
It can be very difficult to give yourself a set income level when you first start out in the small business industry. However, it is critical that you give yourself a set salary and cut that check for yourself each month. Dipping into the business finances too much can be dangerous, but not having enough for basic living expenses is also unwise.
Set a Budget
Everyone knows having a budget is critical to proper management of their home finances; but this is especially true in the business realm. You need to have a set budget for the business so you are not dipping into your personal finances to cover additional expenses each month. Have a budget for what you are willing to put back into the business; this will help you understand the profit margin for your business and know if you are succeeding or not.
Make a Definitive Home Office
If you want your home office to be tax deductible or a business expense there needs to be a clear cut line between the office and the rest of the home. You should not be charging your entire electric bill to the business when you are using much of that power in the rest of the house. Make clear lines between work and home life spaces so you can bill accordingly.
Separate Your Receipts
This is as important as keeping separate accounts. Find different locations to store your personal and business receipts. While it is unlikely you will be audited for your personal receipts, it is critical you have all business receipts stored and readily accessible.