Money Management Tips for
Starting your dream business is a major accomplishment just opening your doors to the public takes an immense amount of dedication, time, work and money. Now, keep the momentum going. Avoid common mistakes that lead to a premature going out of business sale.
Know basic accounting
Be aware of the movement of cash in and out of your business called cash flow. Cash is money in the bank, not inventory, accounts receivable or property. It is what you need to pay salaries, suppliers, utilities, creditors, rent, and so on.
Watch the cash flow carefully. Positive cash flow more coming in than is going out is a signifier of financial health. Negative cash flow more going out than is coming in is an indicator that your company may be in trouble. Being aware of the influx and outgo of money will help you know if too much of your companys assets are tied up in inventory, if you need to collect what is owed to you, or if there simply isnt enough cash coming into the business.
Develop or review your companys balance sheet. A balance sheet is a summary of your company's financial condition at a specific point in time. It lists assets, liabilities and net worth, and will help you understand what your business owns and what it owes at any given time.
Commit yourself to never being removed from your businesss business.
Keep business and personal expenses separate
The desire to blend obligations and assets often stems from an insufficient amount of money coming in to meet either household or company obligations. Have at least six months worth of both business and household expenses saved before opening day. The more cash saved the better, as it often takes far longer for most ventures to turn a profit than you may think. Without such a safety net, you may be tempted to tap into credit cards that are intended for business use and vice versa.
To offset the desire to combine finances, make your personal budget as important as your business budget. It is easy to get carried away and start spending like you have a lot of money coming in because you expect to make a lot in the future. Do not spend what you do not have. This is advice everyone should heed, but it is even more critical for the small business owner. You may need perfect credit to continue to grow your business with future loans, so keeping consumer debt to a minimum and always paying your bills on time is vital.
Pay your taxes
If you will be paying on the quarterly schedule, and almost all small business owners do, you must send in your estimated tax payment, using Form 1040-ES, by the following dates: April 15, June 15, September 15, and January 15.
In order to know how much to pay on a quarterly basis, you are going to have to accurately project what your business will make in the coming year. To save yourself a daunting tax bill (and a 9 percent failure to comply penalty if you dont pay 90 percent of what you owe), be extremely conservative with your estimate. Also keep in mind that you may have to pay additional self-employment taxes, which includes the Medicare tax and the Social Security Tax.
As you may have guessed (or experienced) by now, tax planning can be very complicated. Be sure to meet with a qualified professional to guide you through the IRS maze.
Owning your own business is exciting. It is also a bit of drudgery sometimes. To become and remain successful, you are going to have to muddle through the less thrilling aspects of being your own boss. But the effort is almost always rewarded.
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