Starting your own business can be a dream come true. However, without a sound financial plan, it can quickly become a nightmare. The vast majority of businesses fail within their first five years, and the owners of those businesses are often left scrambling to recover. Save yourself and your business by heeding some financial tips.
Keep Your Business and Personal Expenses Separate
Keeping your business and personal expenses separate can be tough at first, when you are funding your business from your personal savings and relying on your business to support your personal expenses. Consult financial advisors to get your personal finances in order, and then create a separate business account to be used for your business income and expenses. Pay yourself a set salary to begin growing your business while managing your personal finances consistently.
Write a Business Plan
Most businesses take at least a few months and usually a few years to break even and begin seeing profit. Writing a business plan can help you to create a timeline for when you may meet that break-even point. As the real revenues and expenses begin coming in, you can adjust the business plan and determine with greater accuracy when you will actually break even. Having a plan to start can help you to better manage the business and will reassure investors.
Plan for Your Taxes from the Start
Taxes are a whole different ball game when you begin working for yourself. Many new business owners are sideswiped by the incredible IRS tax bill that comes due in April and just that bill and the penalties that can come with not paying it can be enough to break a fledgling business. Planning for your taxes from the start and saving a portion of your business income for the tax bill every month can help you to be prepared when tax season rolls around.
Research Industry Laws
Researching industry laws can save you financial troubles in the form of penalties and fees. There may be different laws that apply to your business based on the industry that you operate in and the size of your business. You may be required to file certain forms, get a vendor’s license, comply with OSHA regulations, purchase unemployment insurance, and perform other actions to conform to existing laws regarding your business.
Automate Your Bookkeeping
Automating your bookkeeping can help you to keep better track of your expenses and revenues so that there are no surprises when you analyze your profits and file your taxes. Automating your books can make it easy for a CPA to help you with your taxes. By reviewing your automated records periodically, you may also spot opportunities for growth that you may have missed trying to piece your bookkeeping together manually.