Starting a business or running a business is definitely a challenge. No matter how much you organize your to-do list or allocate your hours there is always unpredictability. When it comes to your business finances there are 5 money moves that you should adopt to create fewer challenges for yourself.
1) Open a Business Account
As simple as this sounds, as a CPA and financial coach, this is something that many small businesses just don’t do. When they are paid it goes to their personal checking or savings versus going to a business checking or savings account. Or if they have a business account they pay for personal things from it. When you mix business with personal like this you can actually cause your LLC or Corporate protection to be voided. The actual phrase for this is called “Piercing the corporate veil.” It is the removal of legal separation for the shareholders (business owners) and the corporation itself. That means the business owners could be personally liable if the corporation was sued.
2) Hire a Trusted Tax Professional
As a CPA I have come across many businesses where the owner is more concerned about the kind of refund they are getting back or how little they want to pay in taxes. I encourage you to shift your focus as a business. Focus more so on your taxes being filed properly and as correct as possible. I have seen situations where fraudulent tax returns are submitted and now the IRS has come calling with an audit and the business owner has no idea how to prove the numbers reported on their taxes. I remember when I broke even the first few years of business and owed no taxes. Now I make a profit and pay taxes. I see that as a good thing. That mean business has grown, my services are in demand, and people believe in me. The goal is to legally minimize your tax liability not completely avoiding taxes. A trusted professional will help you makes sure you do such things and give you a bit of strategy.
3) Use an Accounting Software
This point ties to the previous two because in order to use accounting software you usually need a bank account. Softwares like QuickBooks, FreshBooks, Sage, and other accounting software are great for helping track business income and expenses. That is how you are able to measure your profits or losses monthly and annually. One can only improve what they can measure so it’s important to allow your business to have a chance at improvement. Using software will also help the trusted professional you hire to be able to easily prepare and file your taxes during tax time. This may save you some money as well because they will spend less time on your taxes since everything will be more organized and put together.
4) Set A Salary/Withdrawal Amount For Yourself
Depending on where you are in business, a salary may not even be an option. Your business may be making just enough to pay your rent, bills and put food in the fridge and that is great! Generating revenue is a big accomplishment that gets downplayed because you didn’t hit your goal of being a million dollar a year business after 2 months. For those that are in the position to designate a salary, I encourage you to do so. That way you help your business win by becoming a more predictable expense item in your business budget. As a tip, the less you take as a salary the more you will have to invest in your business products, services, and marketing. All which done right can yield to more revenue.
5) Pay for What You Need, Not What You Want
Just like it’s easy to get caught up in being sold all the bells when you visit a dealership to buy a car the same can happen in business. You know what you need to get the job done but you get sold the best package that has “tremendous value” or features. It may be the best value but might not be what you need nor can afford right now. It’s okay to go with less and upgrade the package, service or plan later. This approach usually works out for the better because just as with your personal finances, you don’t want to tie up your business cash flow. The more wiggle room you have between your income and expenses the better. Give your baby, a.k.a your business, a chance to survive.
I hope you found these money tips beneficial. Here is to a successful 2019 and beyond! Please feel free to connect with me at @Paychecks2Power on Instagram or visit www.frompaycheckstopower.com.