Over 82% of business failures occur as a result of financial mismanagement and cash flow issues. Starting a new business venture can be a very time-consuming and stressful process. While it is important to prioritize things like customer service and marketing, you also need to make sure your new company is on good financial footing.
If you are a new entrepreneur, you need to work on learning more about how to manage small business finances. Taking the time to learn how to become fiscally responsible will benefit you and your new business venture in the future. Here are some money management tips you need to put into action.
1. Maintaining Your Personal Credit Score
When starting a new business, you will probably need some capital to get things going. If this business requires you to invest in things like delivery vehicles or inventory, taking out a small business loan is a good idea. Before you commit to a particular business loan, you need to do your homework to make sure you are getting the best deal.
Prior to going in and applying for a business loan, take some time to review your credit score. Since your new business is unestablished, you will be unable to get lines of credit with this entity. This means lenders will look at your personal credit score to assess whether or not they can approve your loan request. This is why having a good credit score is extremely important. If there are errors on your credit report, working to get them removed before applying for a loan is a wise move.
Little-Known Ways to Improve Your Personal Credit Score:
- Keep unused credit cards open
- Open store credit cards whenever possible
- Ask for credit line increases on your existing credit cards
- Pay your rent on time
2. Your New Business Needs a Budget
Whether you are starting a new business or buying an existing company from other business owners, setting yourself up for financial success is crucial. The best way to accomplish this goal is by taking the time to devise a detailed budget. Knowing more about how much money is coming in and going out each month can help you see where changes need to be made.
Seizing the opportunity to eliminate wasteful spending from your budget can help your new business succeed. If you are unsure about how to devise a budget for your new business, working with an accountant is a must. With the help of these financial professionals, you will have no problem ironing out the details of your budget.
Make Following a Business Budget Easy By:
- Separating business and personal finances
- Keep all of your receipts
- Using freelance workers instead of hiring full-time employees
- Price shop before choosing outside vendors
3. Set Up An Emergency Fund
The life of a business owner will feature a number of ups and downs. In the world of small business, it is usually feast or famine, which is why saving money is so important. Setting up an emergency fund for your business can help you make it through tough financial times.
While saving money will be hard when first starting a business, it will get easier. As soon as you start to see an uptick in profitability, you need to save this money wisely to avoid financial disasters in the future.
Cut Corners in Unusual Ways to Save Money:
- Turn off lights in your office when they aren’t in use
- Eliminate the cost of paper waste with the help of the cloud
- Encourage employees to work from home
- Buy all office supplies in bulk
4. Be Mindful of Your Taxes
Filing taxes for a new business venture can be a very complex process. Most new entrepreneurs who try and handle this complicated job on their own make a number of mistakes. These mistakes can lead to fines and potential audits by the IRS. Rather than trying to handle tax filing on your own, consider hiring an accountant to help you understand self-employed taxes, as well as file them properly.
Avoid an IRS Audit By Doing Things Like:
- Always file your taxes on time
- Avoid abusing business tax deductions
- Never hide cash transactions
- DIY business tax preparation is never a good idea
Start Your Journey Today!
The road to creating a successful small business is a long and hard one. Setting yourself up for financial success with the tips mentioned in this article can help you achieve your goals.