5 Financial Tips for Starting a Small Business

Victoria Square, Birmingham - athletics track - StartStarting a small business can be a thrilling endeavor, and will hopefully be a positive experience for you. The stability of a business can be maintained by smart financial decisions that are made before you find yourself in trouble or encounter unexpected debt.

Prepare yourself for the future by following these 5 financial tips:

1.  Begin contributing to your own cash reserve

Setting aside funds to start your business may not be enough to tide you over until profits come in. A cash reserve can cover costs in the interim, while you’re waiting for profits, and also help in planning for taxes that may catch you off guard and take a chunk out of the money you were planning to use on other expenses. Be sure to always put money aside for taxes.

Get in the habit of contributing to this reserve on a weekly basis, so that after six months you have a nice cushion.

2.  Examine repercussions of personal debt

Not every promising entrepreneur is able to begin a business debt-free, but it is possible to set up a plan for paying off credit card or student debt so that you aren’t limited in the future. Leaving personal debt out of the picture could prevent you from securing future business loans and damage your credit score.

Make it a priority to pay off personal debt as soon as possible. This will allow you freedom to acquire business capital with good interest rates.

3.  Separate personal and business finances

Independent accounts for personal and business finances will save you from confusion and protect you in case of an audit. Don’t just separate savings accounts. Make sure checking accounts and credit cards are also separate. By never letting these two sets of accounts overlap, you will be better able to manage bills, taxes and other expenses.

This separation protects your business’s credibility and your personal liability.

4.  Make sure you get a paycheck too

Starting a small business requires making many sacrifices, but one of these should not be a paycheck. You might be tempted to make this choice in an effort to invest further in building the business, but it can come with a high cost to you and your family.

Part of your role in starting a small business is learning what type of salaries employees should receive—and this includes you.

5.  Consult a financial expert

An accountant or tax adviser can go over your financial options with you and guide you through any parts of the process that are difficult or overwhelming. An expert’s help is particularly useful when you are trying to comply with tax and business regulations.

Do your research, and prepare as much as you can, but then ask questions. No resource is quite so valuable as a person who is familiar with the larger world of finance and your small business needs.

Image courtesy ell brown

Debby McGrew writes for Debt.org, America’s Debt Help Organization. She hopes her contributions will help consumers make smart financial decisions.

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10 Comments

  1. I think #4 depends on what type of industry you’re in and how you’ve personally prepared financially. I can tell you if you are launching a CPG brand in a highly competitive industry (i.e. grocery), you better be investing every penny in initially!

  2. Of the excellent financial advice given here, I’d have to go with #3 and #5 most. Because I’ve had personal, enlightening situations dealing with those two. When tax time comes around, you don’t want to be the entrepreneur caught mixing bank accounts. And there’s definitely nothing wrong with getting expert help when you have questions.
    Nikki recently posted..Business Debt – 5 Tips to Help You Reduce ItMy Profile

  3. Not only can an expert financial consultant help you with filing the proper tax paperwork and managing your books, but they can also help you identify areas in your business where you can save money or opportunities for growth. Hiring outside help for your small business finances will save you time and help your business grow.

  4. Very nice article i must say ! If business owner not able to invest all the money at the same time then they can prefer bank loans or personal loans. And the other easy and simple option is Merchant Cash Advance. There are many suggestions to start a business one can also borrow money from friends or family members !

  5. t is important to remember that business finances aren’t just about your earnings – they’re about how you spend your money and where you get it. When it comes to where you get your funding, you should understand the two main funding categories:

    Debt funding
    Debt funding is a loan that your company repays with added interest. Through debt financing, you can quickly access capital that you might not otherwise be able to get for weeks or even months. Bank loans, government loans, merchant cash advances, business credit lines and business credit cards are all forms of debt financing, which you must repay even if your company fails.

    Equity funding
    Equity funding, unlike debt funding, does not require repayment if your business fails. However, you will likely have to grant your funders a seat at the decision-making table. Venture capitalists, angel investors, and equity crowdfunding are all forms of equity funding.

  6. As specialist ecommerce accountants, we work with a wide range of clients dealing in online businesses to effectively manage their bookkeeping and streamline their accounting practices. Ecommerce businesses need to account for different VAT rules based on their order destination. For ecommerce businesses offering products and services to international domains, the VAT rules are complex, which would be difficult for a high street accountant to comprehend and understand. However, at Xero Accountants, we have certified and experienced ecommerce accountants, well versed with different local and international VAT rules.
    Eric Neil recently posted..SHOPIFY XERO INTEGRATIONMy Profile

  7. Tax is a legal requirement for every business and to fulfil it we provide our expertise and services. The HMRC has a comprehensive tax code as UK has one of the best tax collection systems in the world. As business tax accountants we advise your company right from the formation process including the various taxes that are applicable on income and salaries.
    Let us help you maintain your business tax with professional business tax accountants at highly affordable rates. Book a free meeting with us today for consultation on your accounting needs.

3 Trackbacks / Pingbacks

  1. Here Are Some Of The Top Tips To Help You Set Up Your Business On The Right Track Financially. « Neeps.com Web Directory
  2. How to Acquire a Business Loan for Small Businesses -
  3. 5 Things To Remember When You Are Setting Up A Business

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