June 16th Blog Post — Small Business Finances
One of the most crucial aspects to your business are your finances, or books, yet they are so easy to overlook. There are countless horror stories of new and even seasoned business owners not being able to pay employees, being penalized for missing estimated tax payments, and countless other mistakes.
Managing your finances is managing your business. If you are not sure where each dollar is going, you are likely spending more money than you think. You are also unable to properly gauge what is succeeding or what is failing for your business. Taxes become increasingly difficult when you are not in control of finances, causing you to pay more in taxes than you need to. When you are first starting your business, every cent is paramount. Here are 3 tips for managing your business as a new small business owner or managing a startup.
1) Track all of your startup costs: I cannot emphasize this enough. Ok, you are rightfully ecstatic to pursue your dream of a startup or small business and you likely have not thought about tax implications because who would? This is an easy mistake to make. Ensure you track your startup costs so you can deduct them. You can deduct up to $5,000 of your startup costs (Bigger ventures will begin to be phased out after $50,000 in startup costs.) Examples of startup costs would be your accounting software, a truck, banners, tools to complete your work etc.. Most things associated with starting your business can be deducted, with some exceptions. I cannot tell you how often I see business owners lose track of these startup expenses, it is such an easy thing to do.
Track them so you pay less in taxes giving you more money to pay yourself or to reinvest back into your company. Maybe even into upgrading some subscriptions.
2) Be intensively selective on your subscriptions: Ok, this one seems pretty minimal but is absolutely vital. When you are first starting off your business, there will be so many expenses to monitor. Bouncing from owner to marketer to manager to accountant, you are perpetually changing hats. Utilizing a myriad of online resources is mandatory to successfully do this. Make sure you tread with caution.
Coming from a place of experience, feeling like you need the upgraded versions of sites to do quality work is so easy. This is not the case however! Useful sites for any small business owner or startup managers such as Canva, Asana, MailChimp etc. are all free! Try their free versions to get a feel for them and get the upgraded versions if you need to expand your functions. However, since you are still figuring out how to optimally use these sites, the upgraded versions tend to pose less benefit when first starting your business. Start with the free version and upgrade if you start needing the functions of the upgraded version. Other crucial programs to operate your business like QuickBooks offer free trials. Capitalize on them!
3) Be in control: This tip is more broad but must be stated. You need to be in control and manage your finances as a startup or small business. Knowing how to utilize balance sheets, cash flow projections, budgets and other aspects to your finances is critical in expanding your business. How are you going to know what services are being used most? What product is selling the most? Which do you profit most from? What service balances profit and enjoyability best? These are all questions that can be answered when in control of your finances. Not to mention how much simpler paying taxes becomes.
With discipline, startup and small business finances can be tracked by the owner. QuickBooks is a spectacular program. If you have a limited budget and can afford the time, try picking up QuickBooks. This will pay immense dividends down the road.
Conclusion
Controlling your finances makes paying taxes substantially easier. Knowing where each dollar is going, will allow you to properly claim deductions and eliminate paying more in taxes than you need to. In addition, you can begin to plan what you will pay in taxes and make appropriate investments to reduce what you end up owing to the IRS. I would recommend consulting with a professional here, but it is absolutely doable as a small business owner.
Money issues are one of the leading causes for failing businesses. Having a grasp on your finances gives you control over your business and wellbeing. To truly succeed as a startup or new small business owner, you must monitor your finances. You can either get in the habit of it or hire a professional, but proper financial practices as a business owner are a necessity.
Keep your entrepreneurial spirit invigorated. Reach out with any questions.
