Starting a business is one of the most exciting things anyone can experience. Entrepreneurs are very passionate about the venture they start and often put their heart and soul into the endeavor.
Unfortunately, not all startups make it, and one of the reasons is that the financial side suffers over the creative side. Take a look at some financial tips that could help you in your small business.
Split Accounts
Don’t mix your business and personal finances. Open a separate account that you only use for your business. You might think it’s easier to use your personal account, but in the long run, you’ll land up spending money for personal expenses that are for the business.
This can only lead to failure as you don’t have control over your business finances. If you have a registered company that will need to submit returns or charge VAT, you must have a separate business account.
Cash Flow Management
Cash flow is one of the most critical factors of a successful business. Balancing your income and expenses, in the beginning, is challenging. Sometimes entrepreneurs mistakenly confuse income with profit and draw on money that needs to be put back into the business for growth.
Sales figures don’t mean anything if they aren’t compared to the costs of sales. Make sure you leave enough money in your business to grow and for daily operational costs.
Limit Expenses
When you start your business, try to limit your fixed costs as much as possible. Consider if you need a large fancy office in the most expensive part of town, or can you work from a small, modest one-room office? Even better, can you work from home?
These types of decisions are crucial in the beginning as you’re working mostly with the capital you have invested in the business.
Be Legal
Small business owners try to get out of legalities. Register your business legally, find an accountant, and set up a consultation with a tax company. Rotfleisch & Samulovitch, experts in the field of tax, highly recommend tax planning.
If you take the time to consult with professionals regarding your small startup, they will guide you as to the best way to set up your business and pay the least amount of tax. It’s a much better option than trying to wing it on your own and getting in trouble a few months down the line.
Pay Yourself
Drawing money and paying yourself are two different things.You should factor in your salary, even a small one, into your business plan. This is one expense that you must pay, you can’t live without money for personal needs.
Entrepreneurs tend to neglect their salary if the business is still new, creating stress and financial discomfort. You don’t need to get a fat paycheck from the offset, but you must give yourself enough to live by, at the very least.
Final Thoughts
Starting a business can be rewarding. Not only financially, but it can fulfill mental and emotional needs. What you don’t need is financial stress in your business that you know you can avoid. Setup your business correctly and follow sound financial advice to grow your business to the next level.
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