Some of the hardest tasks for new business owners are record-keeping and finances. There are varying and competing priorities business owners face, such as whether to focus on developing a brand and investing in marketing, or keeping up with the product or service and investing in the goods to maintain the business. When starting a new company, it’s important for you to be smart about your practices and expenses from the very beginning and to develop good habits for the business to follow for the long term.
Daily Accounting 101
Time should be set aside daily to conduct regular accounting in order to avoid little things getting missed, which can snowball into big problems down the road. You should take time to keep an eye on your accounts to make sure they’re balanced, that bills are being paid, and that there are no mysterious charges or debits. It’s a good practice to set up a budget at the beginning of every fiscal year, but it’s also important to keep track of income and expenses. This can be done on a simple Excel spreadsheet or with one of the various applications or programs that facilitates easy record-keeping.
Lack of accounting is a common cause of small businesses failing. Continuous and accurate accounting can help keep your business afloat, save you time from having to reconstruct it later on, and help you see the profitability of your company on a daily basis.
Search for Ways to Save Money
Setting up a budget and understanding what you have to work with is vital in running a business. Within the budget, consider areas where you can get creative in order to cut costs and increase profit. Also decide what purchases are actually critical for your success. For instance, it may not be essential to buy or rent office space when you can run your business from home and save tens of thousands of dollars per year.
Buying top-of-the-line inventory is also not a necessity. Shop around for usable inventory, and don’t settle on the first price you see. Especially if you’re ordering in bulk or will be ordering a product frequently, reach out about additional discounts. Always shop around for the best offers, use what products you have, and constantly re-evaluate what your business is doing and whether it’s working.
Claim Those Deductions
Certain expenses accrued in the cost of running a business are deductible. It’s important to keep an accurate record of the total amounts of what you’re claiming as a deduction in the event of an audit. There are many tools online and through the nonprofit sector that can help new business owners navigate the murky tax waters. However, unless you’re an accountant, it’s important to hire a professional who can lend advice and help you sift through the growing pains.
Withholding Employee Taxes
A common mistake employers make that can have civil and criminal ramifications is not reserving employee funds to be withheld for tax purposes. Employers who are starting out or falling on hard times may be tempted to use readily-available funds to pay vendors, salaries, rent, and so forth. However, employee funds being withheld by an employer to pay taxes should be held in a separate fund than the one used for daily operations. Keeping this money separate will also reduce the temptation to spend it when cash flow is low. When in doubt, always pay the IRS first.
As hard as it is to start a business, keeping it running can feel impossible. Setting aside time each day for accounting will keep you from waking up to preventable money problems in the future, and constantly looking for ways to save money will help you increase your profits. If you’re smart about your finances, including claiming all of your deductions and withholding employee taxes, you’ll have a better chance of success.
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