What New Business Owners Need To Know About Being Fiscally Responsible
Thanks to nearly 30 million small businesses in the United States, there are more jobs, which have had a positive economic impact on the economy. Whether you’ve always dreamed of being an entrepreneur or you’ve suddenly decided you want to embark on a new life change, you’ve got to consider the financial structure of your home-based business in order to have a shot at success. Sure, it can be easy to get caught up with the “fun” aspects of ownership, but fiscal responsibility is the glue that holds any company together — regardless of size.
Start by establishing an organizational system that works for you — there are many free tools available, so take advantage. Along with creating a realistic budget, start building up an emergency fund in case of unexpected costs -- you never know when a personal emergency or professional opportunity will come along. Depending on the nature of your business, daily responsibilities might involve purchasing duties -- ordering, delivery and taking inventory -- and reading through contracts and proposals to get the most bang for your buck. But that’s just the tip of the iceberg.
It’s in your best interest hire an accountant from the beginning. This professional can help with financial matters such as banking transactions, payroll (if applicable), and accounts receivable/payable. Carve out some of time each month to sit down with your accountant and review receipts and financial statements. Even though your time is best spend making the money, it is important to understand how your company is operating — for better or for worse — in order to make smart adjustments. Cash flow management is one of the number one reasons why businesses fail. The key to longevity is keeping your expenses low in the beginning and focusing on the right things in lieu of unnecessary costs. Your home office should be focused on maximum productivity instead of spending on unnecessary fluff.
As an entrepreneur, you’re going to need to budget for health care and your retirement, and that can be tricky. Once money starts rolling in, consider options such as a Roth IRA and even making some small investments. Ask your accountant how much cash you can spare for savings. Time is money, so make sure you’re creating a detailed schedule of your daily priorities so you’re working to your advantage financially.
Overlooked Financial Obligations
Many newbies overlook crucial business expenses such as office supplies, liability insurance, up-to-date technology, future employees, marketing, business financing, licenses, legal assistance and taxes (more on that next), so don’t underestimate the cost of these items when determining your budget.
Stay On Top Of Your Taxes
Taxes can feel like a daunting process, but they don’t have to be providing you’re organized. Keep all of your records in a safe place where you can regularly access them. Come tax time, consider hiring an advisor who can help you determine, which deductions you can write off — mess this part up and it could end up costing you money. If you have employees or hired independent contractors during the year, it’s your responsibility to deliver the necessary paperwork (W-2 and 1099-Misc forms) so they can do their taxes. The IRS offers more information on employee recordkeeping.
Know How To Successfully Run A Business From Home
Among one of the many deductions you can write off is a home office, but you’ve got to follow the rules in order to reap benefits such as deducting a percentage of household costs such as property taxes, mortgage interest, homeowner insurance, or rent. When setting up your space, choose a low-traffic area that’s free from distractions. Invest in a proper desk and ergonomically designed chair since it’s likely you’ll be spending a lot of time sitting. Make sure you have a good organizational system in place so you can find everything at a moment’s notice. For mental health, incorporate a few personal touches such as photographs or artwork.
In the event that you have to or voluntarily decide to sell your business, keep in mind that it can be a tricky process. While each scenario is different, you may have to pay company investors and creditors, which can vary depending on the nature of your business and percentage in the company. Failing to own up to these responsibilities can cause delays and be a turnoff to potential buyers.
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