Starting a small business is exciting. The idea of working for yourself, setting your own schedule, and defining your own future is something that leads many to daydream and even take action. However, according to the U.S. Small Business Administration, an average of 67.6% of new businesses only survive at least two years. Not to worry, though. There are ways to overcome those odds.
Keeping track of your finances, properly managing your budget, and simplifying your accounting strategy is important for any business owner, and it’s especially true for new businesses. That’s why it’s critical to have small business accounting software that includes tools like bill management and a cash flow statement template. Here are 10 tips to help you set up your business for success:
Tip No. 1: Separate your business finances
One of the first things you need to do is create a business checking account, which will allow you to keep accurate records of company finances from the start. If you run your business through your personal account, it can be difficult to determine how much money your business has and how profitable it is in the long run. A dedicated business account will also help you evaluate your company’s overall financial health and pave the path to future goals.
Tip No. 2: Properly strategize your financing
When you first open a business, you may need to secure funds, such as small business loans, to get started. These financing options have a variety of terms and interest rates, so it’s important to shop around and secure the most attractive option. It’s also a good idea to meet with multiple loan officers to assess your compatibility. That way you know you’re working with someone you trust.
Tip No. 3: Make a realistic budget (and track it!)
Start by outlining all your expenses, such as business insurance, loan payments, payroll, and taxes. This will show the monthly income required to make your business profitable. It will also help you meet goals, grow your company, and plan for the future. Plug these numbers into a small business accounting software that provides comprehensive budget reports, and you’ll be ready to roll. Just remember to be realistic. An impractical budget could take you out of the game before it has even begun.
Tip No. 4: Pay yourself
Don’t forget to include a line in that budget for a regular owner’s distribution, whether it be weekly, bimonthly, or monthly. It can be tempting to put that extra capital back into your business to spur growth; however, the reason you’re starting a small business is to make an independent living, right? Know your value as a business owner and pay yourself accordingly, the same way you would an employee.
Tip No. 5: Minimize your expenses
Examine ways to keep fixed costs, such as office rent, equipment, or new hires, out of your budget. When you add fixed costs to your finances, you immediately decrease your monthly and overall profit margin. Of course, this may not be possible for all businesses, but if you can set up shop in a home office and employ contract workers at the onset, it could free up funding for start-up costs, help with bill management, and allow you to lay a healthier groundwork for future growth.
Tip No. 6: Establish a regular invoicing strategy
What is a leading cause of small business failure? Cash flow. That’s why it’s important to set up a solid billing strategy right out of the gate. Select a small business accounting software that allows you to create professional invoices and receive digital payments. Then set a regular time each month to invoice your customers — a time that will strategically supply funds when you need them for monthly expenses.
Tip No. 7: Stay on top of spending
With all that goes into opening a new business, it can be easy to lose track of bill management mere weeks after opening your doors. Keep track of your bills so they don’t pile up. Additionally, you should evaluate each expense — even small ones — to ensure you’re making purchases that are within your budget.
Tip No. 8: Maintain good business credit
Paying bills in a timely manner is not only important for maintaining a healthy budget, but it can help you obtain excellent business credit. This will come in handy should you apply for a loan to finance commercial real estate, equipment, or other expansions. Once you build sufficient credit, apply for a business credit card. Charge your regular monthly expenses to that card, and promptly pay off your balance at the end of the month to keep your credit score on the rise.
Tip No. 9: Start a business savings account
Some business owners underestimate the importance of saving money. However, these banked bucks can not only act as your rainy-day fund, but they provide the means to invest in future opportunities. For instance, you can harness your savings to invest in stocks as a passive revenue stream or eventually create an attractive employee benefits package to secure a quality workforce.
Tip No. 10: Prepare for tax time
Properly planning for tax obligations is vital to the success of a business. It can not only save big money in the long term, but it will keep you from scrambling come tax time. To develop a solid strategy, consult with a certified tax accountant who can look at your projected profit for the year and recommend the best plan to help you comfortably cover these costs. Using a cash flow statement template can identify above-average sales periods throughout the year, so you know the best time to put money back.
When starting a new business, it’s important to achieve peace of mind and keep stress at a minimum. Start out strong by developing a comprehensive financial plan with small business accounting software that can easily support that strategy. With these tools, you can stay on top of bill management and gain access to an efficient cash flow statement template, so you can clock out with confidence at the end of the day.