By | Samantha Higgins
If you’re just starting out as an entrepreneur, it may seem like your personal and professional finances are one and the same. However, as your business starts to grow, making an effort to separate your financials becomes incredibly important. As you work to grow your company, you’ll need to stay on track of your business financials to make sure you know exactly where your money is going.
Managing Your Business’ Finances
Tracking your finances as a business owner may sound more complicated than it needs to be. While keeping track of where your money is coming and going can get tricky, using the following best practices will help you get on the right path:
1. Open up a Bank Account
The first step in sorting out your business financials is opening up a business account. While you likely already have a personal bank account, creating a one dedicated to your business will save you the headache of keeping your personal and professional life separate. Entrepreneurs that fail to do so will find themselves at a loss when tax time comes.
Avoid this future headache by taking the time to separate your bank accounts. Whether you open up a business account or you simply use two separate personal accounts, this is the best way to keep track of everything.
2. Track All Expenses
In addition to organizing your income, it’s important that you make an effort to track your expenses. Solid bookkeeping for your business starts with accurate and effective expense tracking. Cloud based bookkeeping tools such as QuickBooks Enterprise Hosting based on cloud desktop as a service technology can help you in this. Without a clear understanding of the comings and goings of your earnings, you’ll find yourself in a tight financial space more often than not.
Start by using a system that allows you to monitor your business’ growth, build financial statements, track deductible expenses, and prepare tax returns. Likewise, keeping track of expenses for entertainment, business travel, transportation, office supplies, and the like will help you prepare for tax season.
In addition to monitoring your expenses, your bookkeeping methods should also successfully track the day-to-day transactions, reconcile bank statements, and categorize everything efficiently. While many entrepreneurs manage their own books with software like Wave or Quickbooks, if you have the resources, consider outsourcing your bookkeeping needs with a professional accountant.
3. File Your Taxes Properly
Having separate accounts for your business and personal finances should make it easier to pay taxes. However, filing taxes as a small business owner can still be challenging. For example, the IRS asks entrepreneurs to differentiate between a sole proprietorship, single-member LLC, corporation, S-corporation, or multi-member LLC or partnership when filing.
In addition to selecting the right form, another area where business owners may experience confusion when filing their taxes is with their business deductions. Taking deductions for mileage, self-employment tax, and health insurance into account can save you a significant amount of money in the long run. While it may take some getting used to, entrepreneurs will find that organized bookkeeping and financial best practices will make filing that much easier.
With all the various aspects involved in filling one’s business taxes, some entrepreneurs may be so overwhelmed that they completely miss the tax deadline. If this is the case for you, it’s important to consider other options for getting your business in good standing with the IRS. Penalty abatement can be a viable solution for business owners that have missed tax deadlines. With the help of an experienced attorney, you may be eligible to receive relief from what you owe the IRS.
4. Use a Payroll System
When entrepreneurs decide to start a small business, it may not make sense to immediately hire staff. However, as your business grows, you may find that you need extra help. While you can pay each employee on a case-by-case basis, developing a payroll system is the next best way to keep your financials in order.
Experts recommend outsourcing one’s payroll needs to offer all staff members services and resources like state unemployment insurance, employment poster compliance, garnishment payment services, and similar essentials that all employees can benefit from.
Starting your own company is far from easy, especially when it comes to managing your money. Make sure your business financials are handled properly by using this guide to stay on track.