INTERNET MARKETING

INTERNET MARKETING

INTERNET MARKETING

 

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Top 10 Tips to Manage Small Biz Finances

 

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The management of business finances is critical to the survival of any business, large or small.  Many entrepreneurs fail to take managing their small business finances seriously.  This can be a costly mistake especially when there are business partners involved. 

 

Taking the time to manage your small business finances can pay off when it comes time to do your taxes, borrow money, seek out investors or sell the business. 

 

Focus on these top 10 tips to effective manage your small business finances.

 

1.  Separate Personal and Business Finances:

 

Keep your pesonal finances separate from your business finances.  Create a separate bank account for the business.  Conduct all business transactions from the business banking account.  This will make it easier to track expenses and prepare for tax filing.  Learn more about opening a small business bank account.

 

2.  Keep Expense Receipts:

 

Expense receipts is a record of what you spent your money on.  Maintaining the receipts will make the task of recording your expenses easy.  It is also important if you were to be audited by the IRS.  It is also important for an outside accountant to audit your records. 

 

3.  Track Expenses:

 

Track your business expenses to ensure that you are paying them on time.  Not paying your bills on time could lead to a bad credit record which could impact your ability to get credit or miss out on contracting opportunities.  Knowing when expenses have to be paid enables you to avoid having to pay late fees.

 

4.  Record and Reconcile:

 

Not only should you be keeping track of your expenses, you should also be recording them on a regular basis throughout the year.  Use a service such as Quickbooks or other financial software to record your business expenses and income.  Reconcile this information with your bank accounts as well.  Check for discrepancies between withdrawals and deposits. 

 

5.  Avoid Cash:

 

Avoid doing business with cash.  With cash transactions the only record of the transaction is a receipt.  Hard copy receipts can get loss or become unreadable.  Use a credit or debit card from your business banking account to make purchases and payments.  With this method a permanent record will be established which you can access at anytime online through your bank account.

 

6.  Get an Outside Review:

 

Itís important to get an outside review (by accountants) of your small business finances.  Even if you have a full-time employee to manage your books or if you manage your books yourself, you should still get an outside review.  You can establish a regular review once a year or once every two years.  An outside reviewer can give you tips on how to manage your books and bring to your attention things that you might have missed.  An outside review also prepares your business for any scrutiny that a lender, investor or buyer may have in the eventuality you decide to borrow money, seek an investor or sell the business.

 

7.  Save up to Pay Taxes:

 

Remember you have to pay business taxes.  .  Manage your finances to ensure that you set aside money to be able to pay your taxes when they come due.  Not being able to pay your taxes could lead to the demise of your business very quickly.

8.  Deduct Sales Tax:

 

You have to remember to deduct sales tax from total sales.  If you sell a physical product and collyouíre most likely collecting sales taxes which later have to be paid to the respective state.  Donít include the sales tax when accounting for your total sales.  If you forget to subtract it your overall income could be inflated thus forcing you to pay a higher tax rate.   

 

9.  Implement Internal Controls:

 

To protect the business you must implement internal controls.  These controls should include the following:

 

- Backup Financial Data:   Your financial data is critical to your business.  You should back it up regularly to ensure that you can gain access to it when needed.  You should use an online service that lets you gain access to the data year after year from anywhere.

 

- Separate Responsibilities:  The person with purchasing authority should not be the same person with authorizing authority.  Unless these two functions are performed by the owner/founder of the business it should not be given to the same person.  Giving these two functions to someone else is opening the door to fraud.

 

- Safeguard cash/Checks:  If you have to maintain cash and checks on hand you should have a safe in a secured area where it can be maintained.  Limit access to the safe and use alarms to warn you if anyone attempt to gain unauthorized access.

 

- Safeguard Records:  Safeguard any critical records such as receipts, invoices, etc.  These are also critical documents.  They should be protected from unauthorized access, fires, floods, etc.  A fire proof safe is a food place for storing these documents.

 

- Conduct Monthly Reconcillations:  As the owner/CEO of your business you should conduct monthly reconcillation of the financial records.  The purpose of this is to ensure that the procedures are being followed and to uncover fraud. 

 

10. Budget:

 

To effectively manage your small business finances you have to operate on a budget.  You should mapp out your monthly and annual expenses and forecase your income.  A monthly review of your spending and income will give you the ability to see if youíre on track to meet your annual objectives.  This will enable you to stick to a spending limit and meet your obligations.  Train your staff to be disciplined and stick to the budget.  Learn more about budgeting.

 

 

 

 

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