Financial Tips For Small Business Owners
Being an entrepreneur means that you have the flexibility to run your schedule and business your way. However, this much freedom also means that there is a possibility of getting off track once in a while —especially when finances are involved.
If you’re looking for ways to better manage your money, here are five financial tips we recommend for small business owners:
1. Pay yourself
You’re excited about your business and the countless possibilities in which you can grow it further. However, remember to pay one of the most hardworking employees in the company: Yourself.
Before reinvesting the money you earn back to your business, assess and set the percentage that you would prefer to set aside for your personal expenses and future investments.
Digital Media Consultant and Investor, John Boitnott, suggests that small business owners should start a 401(k) match plan at their own company and take advantage of that perk.
2. Be open to investment opportunities
There’s a reason why people invest and that is to find more ways to grow. The same goes for your business, and for you as an owner. Business Matters Magazine perfectly lists the different ways entrepreneurs can invest their money.
Each one has its own benefits and drawbacks. It’s all just a matter of your risk appetite and how fast you would like to see your money grow.
3. Separate business and personal accounts
The reason why you should segregate business expenses from personal expenses goes beyond the fact that things can get confusing.
One example is that the Internal Revenue Service sets clear guidelines on how only businesses can deduct business expenses. If some of your business expenses go through your personal bank, it might give an impression that your business is more like a hobby.
Having a separate business account can also mean a lot when it comes to how you present your company to others. It shows professionalism and gives customers peace of mind that they are dealing with an official entity.
4. Be realistic with your budget
Did you know that most startups launch a business with less than $50,000 of funding? Some are lucky to be backed up by financial institutions since most small businesses are financed by the owners themselves. This just shows that every dollar counts.
Before you can even have a solid financial plan, you need to be wise with how you budget your expenses.
Being realistic about your spending and revenue goals is the starting point. This means that you first need to audit your monthly expenses—what’s working, what’s essential, which ones are fixed costs, and which ones you should let go of.
5. Continue to strive for financial literacy
A study from Intuit shows that 44% of surveyed small business owners had below-basic financial literacy skills. This is an alarming revelation since the same research reveals that many of the respondents also believe that being better informed about financial literacy would make them more profitable.
As times and trends change, more and more options may pop up your way. Keep an eye out and continue learning about these different options as your spending adapts to how your business is progressing.
Whether you’ve been running your small business for some time now, or this is your first time trying your hand at entrepreneurship, knowing how to handle your finances is one skill that will always prove to be valuable. Use these financial tips as you continue to grow your small business.