When you’re first starting out with a small business or organization, it’s easy to get lost in the excitement. You might forget to think about your finances, or underestimate how important it is to keep up with even the smallest details. Don’t risk falling into a financial trap — all it takes is a basic understanding of how to handle your money.
Know What Comes In and What Goes Out
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The most basic thing you need to know about your business’s finances involves where your money goes. Your cash flow is understandably one of your highest concerns. How much does it cost to make or produce whatever you’re offering? How much do you charge? How much do you pay out to suppliers, employees, insurance companies, taxes, and yourself? Remember this basic equation: revenue minus expenses equals total cash flow. Your expenses will go out to:
- Employee salary
- Possible investments
- Retirement funds
- And your own salary
Keep Your Expenses Separate
It’s tempting to use the petty cash accounts to pay for some of your own expenses. Avoid that temptation at all costs, because it will cost you. A new bike for your daughter is not a business expense. A new suit for a meeting with potential clients is technically a business expense.
The point is, you have to keep your expenses separate. Don’t convince yourself that it’s okay to dip into your business account to pay your personal cell phone bill, then cut that amount from your paycheck. If you do that, it will quickly become a habit. It gets easier and easier to justify what is, at heart, unethical behavior. Keep your personal expenses completely separate from your business expenses.
Get a Better Bank Account
The best way to keep all of your finances and expenses separate is to immediately open up a bank account strictly for your business. You might choose to go with a co-op account or a traditional bank. You can then use that account for all the payouts related to your business. This will also allow you to cut checks for your employees, and it will keep you away from the temptation of dipping in for any expenses not related to your business.
Think About Hiring a Professional
Dealing with financial situations gets tricky. In addition to paying for everything related to your business, you also have to worry about taxes and everything they involve, like possible deductions. For that reason, it’s a good idea to hire an outside company to take care of your finances. Look into accounting and bookkeeping services from an outside source such as Silver Lake Partners. That way you receive professional advice and your finances stay organized. You won’t have to spend as much time worrying about money. Instead, you can focus on making it.
If you want a successful business that makes money, you have to keep your finances in order all the way across the board. If there are problems behind the scenes, you can’t stay in the black.