One of the first challenges facing entrepreneurs who normally tend to more comfortable with technical issues of product design and manufacture is managing the startup finances in the right way. After all, poor cash management is among the top reasons for startups failing to survive, according to https://www.entrepreneur.com. Some helpful tips for small business owners on managing finances better:
Make a Clear Distinction between Business and Personal Finances
Unless you identify and separate business finance from your personal finance, you will be headed to an accounting disaster. The separation of finances has multiple benefits. By raising invoices and accepting payments in the name of the business instead of your own name reflects a professional attitude and works wonders for your business image. Also, you can only take advantage of the various tax breaks permitted to businesses if you keep the business expenses separate from your own. If you mix up the two, an IRS audit could easily have your personal finances being investigated. Keeping separate books of accounts is also important for building business credit in the medium and long terms.
Hire a CPA, Advises Eric Dalius
Even if you have filed your tax returns by yourself, business finance is far more complicated and unless the returns are handled by a CPA, you could potentially lose out on several tax deductions and benefits. Also, a CPA will be able to offer you invaluable advice regarding how to plan your business finances, not only from the tax point of view but also regarding cash flow management and investment planning. Lack of proper knowledge can result in your not complying with all the rules and regulations and exposing you to stiff penalties warns EJ Dalius.
Get Business Assets Insured
You would perhaps already be having insurance cover for your home and car, typically your largest personal assets. However, now that you have a business, you need to obtain suitable cover for your business assets too like plant and machinery, office premises, computers, as well as inventory. By law, you will also be required to have workers compensation insurance as well as liability insurance, in case you have employees. The simplest way of getting the necessary cover is to contact your insurance agent who will advise you of the most optimum cover.
Use Business Accounting Software
Regardless of the size of your business, there is nothing to be gained by investing your valuable time in managing accounts while you should be looking at increasing sales and profits. Rather than keep an army of accountants, you should invest in good accounting software packages that will not only make the job easier but also provide you with helpful reports for managing your business finances better.
In addition to the above, business owners should familiarize themselves with the various laws that apply to them. These typically include workers’ compensation, employment, unemployment insurance, safety regulations, overtime, tax filings, etc. Any violation can attract very stiff penalties that might cripple your business. It can be helpful to hire a business attorney to keep you safe from the minefield of local, state, and federal rules and regulations.