1. Review Your Finances Frequently...Don’t be Afraid to Look at the Numbers!
I know in this day and age, how easy it is to swipe debit and credit cards without checking bank accounts for days, even weeks at a time! As a small business owner, this NEEDS to become a habit. Things happen, like clients paying late and unexpected expenses, and you need to be aware of what money is coming into your account, and what is leaving it at all times.
You should be reviewing the status of your finances frequently. You can review your accounts on a weekly or monthly basis, but having a good understanding of your financial business operations is crucial to ensuring that you are remaining legally legit. I suggest setting aside AT MINIMUM one day a month to review finances.
2. Keep Your Business Accounts and Finances Organized.
Keeping your business bank accounts organized is one of the most important things you can do to stay legit. Come tax season, you will be thanking yourself for keeping your accounts organized and easy to follow. Remember, you should keep your finances organized for yourself and in case your business is audited.
Using apps and computer software programs can help you keep track of your receipts and invoices. Make sure your business bank accounts align with the payments and income of your business.
3. Save 30% of Your Income For Taxes.
I know it can be really hard to set aside such a large portion of your income. It takes a lot of self-control! But this is not an option, you have to get in this habit in order to stay legally compliant.
Remind yourself that the 30 percent of your income was never your money in the first place. Because we live in this great country, the government takes a portion of everyone’s income and that’s part of the deal! That’s why it is best to set this 30 percent aside immediately.
4. Pay Yourself from Your Business!
You are working hard for your business, and you absolutely should take a share in that revenue if there is enough after taxes and business expenses. You don’t have to pay yourself on a typical bi-weekly schedule, but you should try and keep the personal income paychecks on regular intervals. If your business is ever audited, you can explain your payments easier than a bunch of random, sporadic payments...That might look fishy.
5. Make a Budget and Follow it!
Creating a budget and sticking to it will ensure your business stays legally compliant. Like I mentioned before, if we just swipe our cards and don’t pay attention to budget, the expenses are likely to exceed the balance. Follow your business budget strictly, and don’t deviate from the budget. An emergency is the only reason a small business owner may step outside the budget, but everyday impulses should be controlled.
6. Say No to Debt!
Having debt while starting a small business is common, but that doesn’t mean you should get comfortable or used to the debt.
It is important as a small business owner to pay attention to the debt and consistently work to reduce the debt during the first 1-2 years of business. At minimum, you should be making consistent payments on your debt, whether it be a business credit card or loan, but I would suggest you pay off the debt faster than your repayment schedule to save on interest rates.
If you have debt in your business, paying it off should be a priority!
7. Ask for help.
Financial and legal requirements on businesses can be confusing and intimidating. It is hard to be an expert in these fields as a small business owner, so don’t be afraid to ask for help! There are individuals who have mastered this information (like CPAs and attorneys) and can help you out, so that you can focus on what you do best in your small business! Feel free to contact me if you need any specific legal help pertaining to your biz!