Keeping on top of your finances and business accounts comes part and parcel with being a business owner. Part of your job is ensuring you are keeping track of the numbers so that you know how much profit you are making, as well as your outgoings so that you can make a decision as to whether you need to cut down on business expenses or whether there is room in the budget to bring on another employee.
Not all of us are number savvy or understand where to start when it comes to keeping on top of business finances. Here are a few tips to help you run your business and ensure that your business’s finances are looking good.
Separate Your Business and Personal Finances
It can be easy to put all your personal finances into your business, and while you may need to put some money forward when initially starting out, you shouldn’t put in all your personal finances or keep merging the two once your business is up and running. This can make it difficult to keep the two separate, and you need to know exactly how much money your business is bringing in. What’s more, you will need to pay for business expenses and taxes towards your business, too. Paying employees could also become much more difficult.
Open up a separate business bank account and have a credit card for expenses. This will help you differentiate the two. It will also help you simplify your company’s value.
Pay Yourself a Wage
Stop the temptation of dipping into your business’s finances by paying yourself a wage. Not only does this make you a better and more fair business owner, but it helps you separate your business and personal finances even more while also allowing you to do your taxes more accurately. Paying yourself a minimum wage can also help you test the success of your business as you use the capital to grow. As a small business owner, you may want to pay yourself a lower wage so that you have a tax-free salary.
Keep on Top of Your Accounts
After every expense or sale, make sure you update your accounts so that you can have an accurate log and know exactly where your money is going. If you are not savvy when it comes to finances, you may want to hire an experienced accountant so that they can keep track for you, but also spot any ways to improve your business’s accounts or make more of a profit (e.g., you may be spending too much money on a particular area of your business).
What to Do if You Get Hit with an IRS Audit
An IRS audit means that your business has been selected to show the IRS your business’s tax returns. The selection isn’t completely random, so it may mean that your business has failed to report on its income, for example. However, if you know that you have done everything correctly and you have been asked to engage in an IRS audit, there is no reason to panic as certain industries are more likely to be asked to undergo one.
If you are a proud business owner, be sure to show this through your business accounts. Learn how to keep on top of your records so that you can make the most out of your business through great financial records.
Jason is the Marketing Manager at a local advertising company in Australia. He moved to Australia 10 years back for his passion for advertising. Jason recently joined BFA as a volunteer writer and contributes by sharing his valuable experience and knowledge.