Setting Up the Basics in Your Business Finances
Today on the blog we are talking about how to set up all the basics to set yourself up for success when it comes to your business finances. If you are about to start a business or recently just started your business, here are the first steps you should take in planning, setting up, and managing your business finances.
- Legalize Your Business. The very first step, before you even begin to plan and strategize your business finances, is making sure your business is registered. Decide on a business structure, for example, a sole proprietorship, LLC, Corp, etc. Then, following your state’s requirements, register your business, file for an Employer Id Number with the IRS, and apply for any business licenses you may need. It is important to make sure your business is registered to make sure you are running and operating your business legally.
- Set Up Your Bank Accounts. Once your business is registered and you have all the proper documentations, the next step is to set up your business bank accounts. It is highly recommended that you have a completely separate bank account just for your business. Make sure to include a savings account for business use only as well which can be used to invest in your business at a future date or in case of emergencies.
- Decide on a Budget and Write Down Financial Goals. Once you have registered your business and set up your business bank accounts you are ready to start planning and begin creating an organized system to manage your business finances. To get started, create a budget for your business. You will definitely need to set up an overall budget along with monthly budgets and categorized budgets for different expenses. Along with a budget, create a list of Financial Goals. Whenever setting goals, always remember to use the SMART Method and keep in mind that it takes time to build a business, so expect deficits within the first year of business.
- Sign up for an Accounting Program. To create an organized system to manage your business finances, first, you need to decide on an accounting program. Some examples are Fresh Books and QuickBooks. Research different accounting programs, ask friends what they prefer and why, and decide on a program that feels suitable for you and your business.
- Start a Bookkeeping System. Once you’ve decided on an Accounting Program, create a bookkeeping system. Within your accounting program, you will need to set up a usable bookkeeping system, familiarize yourself with it to then manage on a daily basis with ease. Also outside of your accounting program set up spreadsheets in Excel to further manage and track income, expenses, plan for taxes, etc. Another note, always keep a second record of everything on hand, keep these backups in a safe place.
- Create a Paperwork Organization System. Your accounting program and your Excel spreadsheets are the main portions of your Business Finances system, but some expenses and transaction do occur on paper. For example, receipts or contracts, obviously not exchanged via online transaction. These papers will need to be organized as well, create a paper filing system to keep hard copies and furthermore scan documents to file in your online system too.
- Download the Apps. Thanks to technology continuously updating, there are multiple apps that can help you manage your business finances. Apps such as Mile IQ that track your mileage to help write off on your taxes as an expense for travel used for business are definitely a must to have on hand. Research and download the best apps suitable for you and your business.
- Schedule time for Check Ins & Reviews. Once you have created a strong bookkeeping and paperwork organization system, now it is time to continue to keep that system sustainable. Plan and schedule time in your calendar to keep up to date with your finances and organizing paperwork/filing on a weekly and monthly basis, check in on your finance goals and budgets (monthly and quarterly), conduct reviews, write and carry out changes to improve your financial situation. Managing the finances in your business is extremely important and scheduling time weekly, monthly, and quarterly to fill out your books, organize your papers, and plan and review will help make your business more sustainable and successful.
- Plan and Prepare for Taxes. Monthly and Quarterly check-ins are perfect for planning and preparing for taxes every year. Make sure to create a strong game plan. Tasks like setting aside money for taxes throughout the year, keeping track of expenses and write offs, and finally keeping everything in one place to make for easy grab and go during tax time will set you up for success and make for a less stressful tax season. With a strong organized system, you can plan and get a handle on your taxes early, that way you can prepare for unexpected emergencies and have time to hire an accountant if needed.
- Research & Seek a Professional. Finally, when in doubt always seek a professional. If you are just starting out, hiring a bookkeeper and an accountant isn’t always affordable, however; if you do have the resources it is always recommended that you hire an accountant and/or bookkeeper. Whether you are seeking a professional to help you set up a strong financial system or having them review and audit the one you currently have, research and keep on hand the contact information of your favorite Accountants and Bookkeepers. Accountants can help you file taxes or review taxes before submitting and bookkeepers can help you manage your books throughout the year, either way having a professional touch in your finances will never hurt your business.
These ten steps are just the beginning to planning, setting up, and managing your business finances. With these ten steps you are able to start building a foundation for your finances, to learn more information about how to dive into getting familiar with business finances contact either a certified Accountant, Bookkeeper, or Finance Coach.