At the end of the day, every small business owner longs to turn a profit. Maybe you didn’t get into your business simply to turn a buck, but you still need to stay in the black if you want to keep making your products and leading your team. If your financial house isn’t in order, then everything else you love about running the business is in jeopardy.
So what do you need to do to get your small business finances in order? Know what kind of revenues you are bringing in. Be aware of the expenses and liabilities you’ve taken on. Make some reasonable projections about the future.
Does that sound overwhelming? It doesn’t have to be. Consider some pro tips to get some clarity about your small business finances.
1) Separate business and personal finances
It may seem tempting to conflate your business and personal finances, putting everything on the same card or in the same bank account. Over time, it will just make your life more complicated. For one thing, combining business and personal finances makes it hard to track your business spending, or to monitor progress toward business financial goals.
To keep things separate, the first thing you’ll want to do is establish your business as an LLC. This is a legal structure that marks a clear separation between business and personal finances. An LLC will also protect your personal assets from being involved in any legal disputes. If you live in NC, for instance, it may help you to get an LLC in North Carolina, establishing your corporation as an independent, separate legal entity.
2) Hire a professional bookkeeper
Small business owners tend to be fiercely independent, and are often unwilling to admit when something’s beyond their expertise. But just as you need to hire an attorney to handle complicated legal matters, it’s smart to outsource granular financial stuff to a bookkeeper.
Not only does this ensure a high level of accuracy and precision, but it frees more of your time for vision, strategy, customer service, and team leadership. Those are the tasks that only you, the business owner, can handle.
3) Create a budget
Budgeting can seem dull, but it’s really one of the most important things you can do to keep your business in good shape financially.
The important thing to keep in mind is that a budget doesn’t have to be a thorough accounting of every single penny you spend. Think of it more as a framework, providing you with a basic sense of the money coming into the business and the money going out.
Viewing a budget in this way can enable you to be wise about your spending priorities, and to be diligent in planning for the future.
4) Limit your unnecessary expenses
Once you’ve made a budget, sit down and look at some of the places where you’re spending a lot of money. Do you see any expenses that aren’t really needed? For example, are you spending a ton of money to rent office space when you and your team members could easily work from home?
Sometimes it hurts to eliminate expenses, especially when they’ve grown comfortable and familiar. However, being honest about the areas where you’re splurging and overspending is an important step toward greater financial stability.
5) Pay yourself a salary
Some business owners decide to opt out of a salary, instead pouring everything into the business itself. This sounds responsible but can actually be harmful in the long run.
By paying yourself a salary, you’ll have money to handle any personal expenses that arise, without any temptation to dip into business funds. Also, paying yourself a salary can help you build your savings, which can be crucial if the business doesn’t work out.
6) Choose the right software
Even if you hire a bookkeeper, you’ll want access to accounting software, that allows you to quickly look at profit and loss statements, balance sheets, and other essential documents.
There are lots of great accounting software tools out there. To find the one that’s best suited for your business, we recommend looking for the following features:
- Cloud-based access.
- Integration with your bank/credit union, payroll company, and other key vendors.
- Great customer support, just in case questions arise.
- Automation, including automated invoicing.
Making Sense of Your Small Business Financials
To succeed in your business, you’ll need to get a grip on your finances. That means having a clear sense of the big picture, eliminating unneeded expenses, and getting the help you need to budget, forecast, and keep the books.
By following these steps, you can set yourself up for long-term success… allowing you not just to turn a profit, but to offer stability for your customers, employees, and family members.
About the Author: Amanda E. Clark is a contributing writer to LLC University. She is a graduate of Eastern Michigan University and holds degrees in Journalism, Political Science, and English. She became a professional writer in 2008 and has led marketing and advertising initiatives for several Fortune 500 companies. She has appeared as a subject matter expert on panels about content and social media marketing. She regularly leads seminars and training sessions on trends and tactics in professional writing.
LLC University guides business owners and entrepreneurs about how to set up LLCs for their businesses without getting trapped in legalities. So far they’ve helped them save over $34 million in unnecessary legalities and fees.