Smart Financial Tips for Small Business Owners
One of the hardest parts of launching a small business is the idea: finding and perfecting the product or service that you’ll provide better than anyone else.
No less important, though, is how you’ll set up and finance your operation, because no matter how visionary your idea, it can’t carry you and your employees all on its own.
Here are a few tips for setting up the finances at your small business.
Keep your business accounts separate
Set up bank and credit card accounts specifically for your business, separate from your personal accounts. It just makes life easier.
If your business is structured as a corporation, this separation will be forced upon you; the corporation is its own entity, legally. But even if you’re set up as a sole proprietorship, the simplest and most common arrangement for new small businesses, you still should establish these financial boundaries.
The reasons become clear at tax time. Maintaining a separate set of business transactions makes it easier to track deductible expenses. It also would reduce your stress in the event of an IRS audit. Furthermore, keeping your money all mixed together would make you personally liable for all of the business’s debts and obligations.
Pick the right business bank account
The features that will guide you in picking a business checking account from an institution such as First Bank & Trust are different than those when choosing a personal account. Here are some things to consider:
- What type of business do you have? Sole proprietorships and nonprofits might qualify for account perks such as fee waivers.
- Are there transaction limits? An account may come with a fixed number of actions you’re allowed to take for free — such as making deposits, writing checks, making ACH transfers — before fees kick in.
- Are there limits on cash deposits? There may be a cap on how much you can keep in an account; go over it and the bank will charge a fee for handling the excess cash.
You might also consider the options and interest rates available on business loans and lines of credit. Borrowing is often how small businesses obtain money, and even if you don’t need it now, it’s nice to know what’s available for when you do.
Get help where you can
You’re responsible for a lot as a business owner. If you can get help with services such as payment processing, cash management, payroll services or electronic deposits, it frees you up to concentrate on other aspects of the business that demand your attention.
If you do turn over the handling of any of these services, accuracy, access and reliability will be crucial. Check with other business owners you trust to see whether they have any recommendations.
The ground never stays still for long underneath a small business. The more parts of your operation that you can set firmly in place, the less likely you’ll one day be jolted, and you can instead focus on turning that idea of yours into a success.
© Copyright 2016 NerdWallet, Inc. All Rights Reserved