A recent survey by Intuit revealed that 65% of Americans have no idea how much they spend. If you’re not watching your finances with an eagle’s eye, your business is going to suffer — which makes it even harder to safeguard your business’s financial future. Finance tracking is essential to growing your business because it allows you to keep tabs on finances and build your business around your spending power.
Here are some helpful strategies that will help you stay on top of your financial goals.
Pay Yourself First
Most business owners are so caught up in the daily grind that they fail to look ahead. While it can be tempting to put all your funding towards day-to-day operations, remember that you need to compensate yourself too. You’re likely putting in long hours and toiling away for that perfect product and marketing strategy — and you need to be compensated accordingly. Set yourself a monthly salary or revenue share, and pay yourself just like any other employee.
To successfully manage accounting and payroll, invest in integrated bookkeeping software that will provide you with a strong business foundation. Look for features such as invoice generation, timesheet management, automatic payroll scheduling, accurate calculations, tax filing, and benefits management.
There are additional ways to increase your take home income to safeguard against lower producing months. Automating some of these rolls, like payroll scheduling, can reduce your need for additional employees, which can lower financial strain during lean months. You can also look into refinancing your home which may allow you to lower your monthly mortgage payment significantly, and provide you with a little extra cash each month. There is also the option to pull out some money from your equity if there is a specific project you need funded. It’s important to look at all of your options before you make a decision, so you know it is the best choice for you at that moment.
Make Spreadsheets (Lots of Them)
Spreadsheets are your new best friend. Keep track of orders by entering in the date, category, vendor, cost, and other expenses, so you’re aware of money going out. Categorize your expenses by sections such as marketing, mortgage, travel expenses, and more so you know which sector of business is sucking up the most money. Full transparency over the kinds of costs you have will allow for minor tweaks and changes that can go a long way in saving you billable expenses.
Set up a Billing System
Just as you track money going out, you need to be on top of money coming in. Many clients will look for any excuse possible to make late payments or renege on bills altogether. This can seriously impact your cash flow and daily operations. To avoid this, ensure you have a standard billing plan that’s preferably automated. For example, invoices go out every month with scheduled follow-up emails and calls depending on days past the due date. You can also set up late payment fees to incentivize clients or early payment discounts to keep them loyal and engaged.
Rethink Your Business Structure
Whether you own a small startup or an established corporation, there are different options for minimizing your tax liability. One such option is choosing between S corp vs C corp. An S corp can be advantageous in certain situations, as it allows owners to pay themselves while still taking advantage of certain tax breaks. On the other hand, a C corp offers more flexibility in terms of attracting investors and raising capital, making it preferable in certain circumstances. Ultimately, the right option for your business will depend on many factors, including the scale and structure of your operations, as well as your overall tax goals.
Invest, Invest, Invest
Small business owners make the biggest mistake when they fail to invest (both in assets and themselves). Investing in growth is your key — do this through educational seminars or formal business degree programs to learn more, technology that will automate your processes for efficiency, and employees who will make your job easier.
In addition, investing in assets like stocks, bonds, and mutual funds is an absolute must, especially if you’re planning long-term slow growth. By setting yourself up with future capital, you’re believing in your business potential and playing it forward. Be sure to keep up to date with the stock market and finance news so that you’re making prudent decisions about your investments. We suggest a low-risk, buy and hold strategy for companies who plan to be around for the long haul.
Education and organization are the two most essential skills in ensuring your business is financially healthy. Monitoring and keeping track of expenses, overheads, and wages can help define successful business strategies. You’ll be aware of the money coming in and going out, and therefore identify the best path to entrepreneurial success. It’s also crucial to reconsider your business structure to determine whether tax savings are available.
Hoffman & Associates Tax Preparation can maximize your business’s deductions while ensuring you stay compliant. Call us today at (858) 576-1122!