A stunning 7 out of every 10 businesses will fail within the first 10 years. And one major contributing reason for that failure is an inability to control their expenses.
If you’ve recently started your own small business or are still in the planning stages, learning how to properly manage your finances is a must if you want to succeed.
Keep reading to learn 8 top tips and tricks for organizing finances to keep your business on track.
#1. Keep Your Business and Personal Finances Separate
Perhaps the most important thing you can learn about managing finances for your small business is to separate your business finances from your personal one.
When you’re the sole owner of a company that you’re launching from your home or even in a new location, it can be easy for the lines to blur. After all, you’re likely spending your own money to launch your company.
But whether you’re spending thousands of dollars or less than $25 of your own money to launch your business, that’s the only way they should ever be connected.
Right from the start of your business, it’s important to open a separate bank account and put the finances that you plan to use for your business in that account. You might even consider opening a new business credit card that is separate from your other cards.
Many small business owners start their business as the sole proprietor. However, if you want to take separating your finances one step further, creating an LLC might be a good choice.
#2. Keep Every Receipt
Keeping all business receipts is important for companies of any age. After all, these are important when it comes time to file taxes or if you get audited and need to prove your expenses.
But keeping all receipts is even more important when you are first launching your small business.
You’re likely spending a large amount of your own money. You’re also spending it on a variety of materials that can easily be overlooked as business expenses.
From printer paper used for creating your first flyers, to that new laptop you needed for planning and launching your company, and everything in between, these expenses, while they may be small on their own, add up.
And when it comes time to file your taxes, you’ll want to make sure that you have each and every one.
#3. Utilize an Invoicing Software
Trying to keep track of essential documents like invoices for your small business can be confusing.
This is where invoicing software can come in handy.
When you’re also trying to run your business, if you aren’t using an invoicing software, it can be easy to forget your former formatting and end up with many miles-matched invoices. It can also be very easy to lose track of important invoices, which can end up costing your business big.
An invoicing software streamlines the entire process. You can quickly enter the information that you need to create a standard invoice to get paid, or pay your employees, fast. You can also store and search for invoices so that you’ll never be left scrambling to find one again.
Plus, an invoicing software allows you to track which invoices have been paid and which haven’t, as well as see your entire account activity all in one easy dashboard.
#4. Spread Out Tax Payments
When you go from managing only your own personal finances to also managing a business’ finances, tax season can be stressful.
While keeping your receipts helps, those deductions can only do so much to reduce your tax bill.
For new small businesses, that sudden tax payment can spell disaster. If you’re just starting out, profits likely aren’t where you’d hoped they would be quite yet. Having that bill to pay can quickly derail any progress you’ve made.
Spreading out your taxes with quarterly payments can help make them more manageable.
#5. Track Your ROI
Running a business always requires spending some money.
But when you’re launching marketing plans, investing in new software, or otherwise putting money towards something you’re hoping will help you grow, you need to be tracking your ROI.
Each thing your business spends money on should generate a return on your investment. If it isn’t, or if you think that return could be better, you need to search for alternative solutions right away.
Otherwise, you risk letting those poor financial decisions drain your business accounts over.
#6. Go Digital
Organizing your business finances means keeping track of plenty of paperwork.
From invoices to receipts to budgets, misplacing just one document can lead to a lot of headaches.
Digitizing all of your financial paperwork will keep you from ever losing track of an important document again. It will also make it easy to access your financial information from anywhere so that you can work on the go without interruption.
#7. Avoid Over-Delegating
If you are lucky enough to have several employees or even more work for you, you might be tempted to delegate different aspects of your finances to different employees.
Maybe one employee handles invoices while another tracks your budget.
But over-delegating your financial work can lead to mistakes and cause you to miss when things start to go wrong.
If you can’t handle your finances on your own, it might be time to hire a bookkeeper. Or if you do want to delegate different jobs to your employees, create teams and encourage collaboration to make sure that everyone stays organized together.
Organizing Finances for Your Small Business
Organizing finances for your small business don’t have to be a hassle.
By putting these tips and tricks to work, you can get organized and keep your business running smoothly and successfully.
If you want to make sure that your finances are not just organized, but also growing, the next thing you need to learn is how to maximize your marketing budget. Check out this guide to learn everything you need to know about mastering digital marketing.