Managing your company’s finances is the most important part of running a business. Surprisingly, some business owners don’t know the first thing about organizing their finances. This is not only a problem because they can’t pinpoint exactly how much loss or profit they generate in a year, but for other, more serious concerns.
Companies often experience negative cash flows, especially during the startup phase. Some businesses are seasonal, and need a cash reserve to carry them through the slower months. If your business thrives, it will need an investment of funds to sustain growth.
If there is no management of funds, financial planning and savings, it can be detrimental to a business. In this article, we present Finance 101: Keeping your business organized with these tips:
Separate Personal and Business Finances
This may seem like no brainer, but many small business owners don’t realize they must maintain their personal and business finances separately. They charge both types of expenses on the same credit card, finance their business goals with personal loans and transfer profits into their personal banking account.
This presents a major headache at tax time, when either the business owner or their tax accountant must separate every expense into different categories, causing confusion. Plus, fusing finances can raise a red flag and lead IRS to audit your business.
Invest into Accounting Software
If you cannot afford to hire a dedicated accountant to manage your business expenses, purchase accounting software. Although there is likely to be a small learning curve with every new program, this is an efficient way to enter all of your spending, sales, payroll information, etc.
If the software is cloud-based, it will securely maintain your records online, making them accessible anywhere at anytime. This will cut down on your paper usage and make it much more efficient to view and change your financial information at any time.
Register for an Employer Identification Number (EIN)
Just as you require a social security number (SSN) to open personal accounts or register for government issued documents, your business needs its own tax number, called an EIN. You can easily apply for an EIN on the IRS website for free by following this link. This will be required to open credit cards and financial accounts, as well as retirement plans.
Consult a Professional
Every state and some cities have different laws and regulations about running a business. To make sure you are in compliance with these rules, are filing your taxes properly and know the ins and outs of payroll law, it is advantageous to consult a professional about these matters at least once per year.
These can involve certified public accountants (CPA), labor law attorneys and Human Resource administrators. You are not required to hire these professionals on permanently, but can use their services on an as-needed basis.
Although you will need to pay for their expertise, making sure you are following the law will save you from paying penalties or risk ruining your brand image and losing your business.
IOU Financial is committed to helping small businesses become financially secure. We specialize in hassle-free, easy and secure small business loans of up to $300,000. Contact us today at www.ioufinancial.com to speak to us about qualifying for our loans.