Congratulations! You’ve followed your dreams of becoming a small business owner. If you’ve done your research, you know the importance of sound financial decision making.
It’s also important to note that insufficient operating funds are among the top reasons why many businesses fail within the first 5 years.
Are you seeking financial tips for business owners? Keep reading for 5 things every business owner should understand.
1. You Can’t Avoid Financial Decision Making
To survive in business, you must have a sound business plan. A part of the plan gets dedicated to finances and a budget.
Business owners must have a clear vision for the future of the business which includes intermittent goals. Once you reach each milestone, review your success and failure and tweak the next milestone to optimize its potential.
2. Incorporate Your Business
One reason many businesses cannot access business loans is that they choose not to do the legal paperwork to legalize the business. It does not cost much money or time to incorporate.
Managing businesses requires sound financial planning that also requires a level of legitimacy. By incorporating, you show potential customers you are serious about what you do.
In some states, business licenses and certifications are required. Without them, you cannot get proper insurance or permits. This becomes a hindrance to your earnings potential.
3. Open a Business Bank Account
Once incorporated, you can now open a business bank account. There are differences between using a personal bank account vs. a business account.
Among our financial tips is building credit for your business. Until you do so, your personal credit score will decide whether you can get a loan for operating capital.
With a business bank account, there is the opportunity to get business credit cards. You can also offer credit cards and EFT as methods of payment.
Lastly, a business bank account eliminates the need to comingle business and personal funds. When a business can separate business funds, there is a clearer picture of the business’s financial health.
4. Automate as Much as Possible
There was a time when small businesses were the backbone of a community’s financial health. It still is to a certain extent. However, how these businesses operate and still turn a profit has changed.
Software and business applications have digitalized how businesses operate. A small business may not need a full-time accounting clerk if they use an accounting app.
There are many cost-saving financial tips when it comes to staffing vs. outsourcing vs. the use of apps.
5. Pay Yourself a Salary
Too often, small business owners forget to pay themselves. This is a costly mistake that will come to light when it’s time to retire. Plus, giving yourself a salary comes with money-saving tips, like investing in a pre-tax retirement account.
It also reduces your tax bill.
Stay Abreast of Money Matters
Financial decision making provides many ways for a business to run more efficiently and maximize its earnings. Set obtainable goals and reward yourself for each accomplishment.