5 Financial Management Tips For Small Business
If there’s one thing all new business owners have in common… it’s the anxiety around managing their business finances. Most of us are used to having to fill out W-2s, and either getting a refund or paying what we owe… but running a business means you have to keep track of your income, expenses, and making sure you have enough cash to pay your taxes.
Managing business finances can be extremely overwhelming… but, after managing my own freelance copywriting business for 2 years, I have some personal financial management tips for small business that might be helpful!
This article will share 5 easy financial tips for small business owners that you can (and should) implement ASAP because these steps save time and SO MUCH STRESS.
PLEASE NOTE: i AM not A FINANCIAL OR TAX EXPERT. EVERYTHING I SHARE IN THIS BLOG IS MY PERSONAL OPINION ONLY. aka: TAKE EVERYTHING i SAY WITH A GRAIN OF SALT, AND BE SURE TO CONSULT WITH A TAX OR FINANCIAL PROFESSIONAL LOL.
Tip # 1: Use An Invoicing Software
The first of my financial management tips for small business owners has to do with software. Implementing invoicing software as soon as you start your business is a worthy and affordable investment.
I use FreshBooks, and it’s the best thing I’ve ever done for my business and my anxiety. It lets me create, send, and track invoices and receipts. I’ve also connected it with my PayPal account, so I can track my business expenses/purchases, or client payments made via PayPal. It tracks all of my income/outgoing expenses without me having to do hardly ANYTHING.
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And best of all, you can share a link with an accountant, and they’ll have everything they need to file your taxes!
FreshBooks offers a free trial, which is awesome if you wanna test it out. You can also look into other invoicing software, but I’ve only ever used FreshBooks, so I can’t vouch for them. Just do yourself a favor and start using one AS SOON AS POSSIBLE. It helps your biz look more professional, makes receiving payment easier, and helps you stay organized financially.
Note: I’m NOT sponsored by FreshBooks, I just REALLY like their product lol
Tip # 2: Open A Business Bank Account
As soon as you “open up shop”, you should have a specific bank account that holds your income and pays for expenses.
When you open a business account, it will give you a place to store your income for taxes, and you can transfer your “net” income into a spending account- that way you can’t accidentally dip into your “business savings”.
Simultaneously, it makes it easier for you (or your accountant) to track your expenses.
Now, when I say “business account”, I’m not saying you have to open up some crazy elite bank account. Just go to your local credit union (usually because they don’t force you to pay fees to have an account), and open up a regular checking account! 🙂
I have my PayPal and FreshBooks connected to this account, so everything runs like a well-oiled machine. I’d say opening a specified business account is my MOST important tip.
Tip # 3: Save 40-50% Of Your Income Every Month
Setting aside 50% of what you make each month will ensure you have enough to cover your taxes by the end of the year (and probably have a little extra to save, too).
Things will usually be tight at the beginning, but setting this cash aside will save you TONS of headaches and anxiety around tax time. Personally, I live in USA, and our income taxes are usually around 30-ish%, so if I set aside 50%, is more than enough to cover my income taxes. I COULD set aside less, but I’d rather be safe than sorry, ya know.
Please Note (AGAIN): I’m not a tax or financial expert. Be sure to speak with a professional to find out exactly what percentage in taxes YOU should set aside.
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Tip # 4: Hire An Accountant
Now, if you can/want to hire an accountant to handle your finances all year round, go for it.
Personally, I couldn’t afford that (hence FreshBooks). However, I DO pay an accountant to file my TAXES for me.
Being that I’ve only ever filed taxes with a W-2, I was NOT ready to try and file taxes for my biz on my own. Especially cuz I’m married to a spouse who makes a typical W-2 income…
I just… wasn’t gonna mess with that.
The good news is, it usually costs me less than $200 for a tax pro to file my taxes (and since I’ve been diligent with maintaining my finances with FreshBooks and saving 40-50% in my “business account”, I just share my FreshBooks account with my accountant and they’ll take care of the rest!)
If you’re brave enough to try and file yourself- power to you to the 100th degree… but if you’re NOT, that’s also okay, and I recommend hiring a professional to help. It’s worth saving up some extra cash (if that’s possible).
Tip # 5: Keep An Email Folder For Your Business Expense Receipts
So, if you’re using things FreshBooks linked with PayPal, this MIGHT seem redundant.
However… it never hurts to cover all bases! I always keep a “Businesses Receipts” folder in my email, and there are a LOT of times it’s helped me when I need to look for something specific. I even try to only make purchases using my business email address, just to be sure nothing is overlooked/misplaced.
Bonus Tip: if you run your business from home, there are a LOT more things you can write off than you think! Your Tax Pro Will Ask You A Bunch Of Questions To Help With This.
If you buy a new chair for your office, have a devoted workspace, etc, make sure you let your accountant know! These are all things you can write off!
One Final Note Regarding Financial Management Tips For Small Business Owners…?
Prepare, Don’t Panic.
Don’t hold off starting your business because you’re nervous about managing your finances. As you can see, setting your business up for financial wellness is not nearly as complicated as it might seem!
When you implement these simple and affordable practices early on (or at any point, of course- it’s never too late), your business will thank you for it.