It’s one of the more bothersome, but most essential, parts of running a small business: your finances. Sure, you may have a solid entrepreneurial head on your shoulders, but that doesn’t mean that you know anything about small business finance. Small business owners typically don’t begin with a lot of cash in the first place, which tends to lead to a huge number of small businesses that fail in a short time. Business finances cannot be an afterthought – they must be a part of the plan. In fact, there should be no business plan without knowing how much cash is needed and where it’s going to come from. Here are a few small business finance concerns that you should keep top of mind.
1. Create a reasonable budget.
Just like you would do with your personal finances, you need to create a business budget. Especially at the beginning of your business, when you’re making little to no profit, you need to make sure that your business expenses are not going to drive your business into the ground. Catalog the expenses that are necessities for running your business, then write a list of things that would be nice to have, but are not essential. When your business starts pulling in more revenue, then you can allocate to those other expenses.
2. Keep your business and personal finances separate.
When you start your business, you should have a separate business checking account, debit card, and credit card to put all business expenses on. See our top credit card offers to find the best one for your business. It is essential to have a log of all business expenses. This can get murky if you keep all expenses together. It’s also a smart idea to open a business savings account that you can transfer a certain amount of money to from each invoice. This money can be used to pay taxes each year or for emergency expenses.
3. Don’t use business profits for personal gain.
When you start a business and begin making a serious profit, it can be extremely tempting to blow some of your newfound income. Don’t. One of the biggest mistakes that a new business owner can make is spending too much at the beginning. Down the road, after your business is established, you’ll have the ability to live large. At the beginning, though, you should allot yourself a certain salary and stick to it. Leave the rest to go towards business expenses or to save for slower months when profit isn’t as steady or guaranteed.
4. Don’t hire too quickly.
One of your business’s biggest monthly expenses will be payroll. At the beginning, don’t want to try to expand too quickly. Do as much as you can yourself and, if need be, consider outsourcing certain tasks or hiring a virtual assistant on a part-time basis.
Small businesses are fragile. Pay attention to your finances so that you don’t run your money too thin. If you need small business financing, manage your debts wisely. If you’re careful with your finances, your business is that much more likely to succeed.
