Maintaining a business comes with a great deal of independence, but also with plentiful financial responsibility. No matter what business you are in, making a profit is job one. The key to successful money superintendence is organization. These six steps can assist you.
Pay attention to the Calendar
Set aside a block of time each day for minor operations such as scanning paper documents or entering figures into accounting software. One day each week, take an hour to monitor expenses, calculate profits, and review the accounting.
When you first start, it may seem silly to keep personal funds separate from business funds. After all, you may be dealing with small amounts and infrequent activity. However, if you plan to grow the business, there will come a time when you need to know what belongs to the business and what belongs to you. It is cleaner and simpler to separate finances from the start, rather than trying to untangle your commingled funds later. Your business should have its bank account and credit card as soon as it has a name, structure, and business license.
If you have employees, you need to set aside money for several types of payroll deductions including federal income tax, Medicare, and Social Security. Your state may require income tax and other employment taxes as well. A paystub generator can help you and your employees keep current on state and federal requirements. Accuracy is paramount.
Avoid a surprise tax bill by setting aside a percentage of the company’s earnings from the start. Consult with a tax professional to get an annual or quarterly estimate, then reserve an appropriate amount of money each month.
This works with more than just taxes. You can prepare for any quarterly or annual expense if you know it is coming. Suppose you face an annual regulatory fee of $10,000. Simply set aside $833 each month, then when the bill comes due you can pay with ease. Even better, automate the process by having your financial institution sweep the $833 from the debit account to savings on the same day each month.
You need a good filing system, either paper or digital. A functional system allows you to retrieve information easily and quickly. It should be simple and intuitive, yet flexible enough to grow with your business. General categories may include:
- Accounts receivable
- Accounts payable
- Human resources
- Bank records
- Regulatory items
- Tax information
Other categories may be necessary, depending on the nature of your company.
In addition to tracking paperwork, you should keep a close eye on expenditures. Review expenses and cut out fluff whenever possible; shop around for better pricing constantly. New vendors may be on the scene; if you do not wish to switch, existing vendors may match prices.
Examine marketing efforts constantly. Replicate what works and discontinue what does not. Make changes as necessary to keep things fresh. Look for opportunities to expand into new markets. You may be able to garner new customers or sell current clients a new suite of products.
Look at financial reports frequently. The balance sheet is like a net worth statement for the business, showing a snapshot of performance as of any given day. It can be an excellent tool to keep you updated on the firm’s financial health.
Other reports are helpful, too. An income statement, as the name indicates, shows business earnings. Because it also includes expenses, it is a good indicator of how the company has performed over a certain period of time. The bottom line shows either a profit or loss for the time period. You may be even more interested in the statement of cash flows. This report shows money coming in and going out and often highlights signs of trouble.
Keeping an eye on all these reports is like giving your business a health screening. Catching small problems early is the key to solving them before they become bigger and threaten the well-being of the company.