Managing Your Business Finances
In order to be successful with your business finances the first rule of thumb is that you need to keep your personal and business finances separate. This means separate bank accounts for your personal and business finances with no overlap between the two. In order to correctly set up your business in the US and open your bank accounts you need to register your business with your state and/or obtain an EIN (Employer identification number) depending on the structure of your business.
Once your business is registered, below are steps you can take to get on track with managing your business finances:
1. Set up your bank accounts (both checking and savings)
You'll need to take your business registration certification and EIN to a bank to set up your business checking and savings accounts. There are a number of free checking and savings accounts for small business provided you meet certain criteria (e.g maintain a small minimum balance or a minimum or maximum transaction amount). You can research the best business accounts for you via NerdWallet.com.
I also recommended a savings account for your business, because like with your personal finances, you need to plan for the future of your business and also build business equity. If you can create solid business savings once you are past your start up costs you can reduce your reliance on loans or credit.
2. Obtain a business credit card - that you use cautiously
Obtaining a credit card for your business is also a good idea as long as you don't carry over any debt and pay off any charges you incur in full each month. Having a business credit card will help you build and maintain your business credit, provide you with a level of protection on any big business purchases you might make (extended warranties, guarantee of service etc ) and as a plus, you can also earn some really great rewards (extra airline miles, gift cards, discounts etc).
3. Determine how your customers will pay you
Do you plan to accept cash only, check, credit cards or online payments? Accepting credit cards and online payments will give your customers more flexibility in the way they can pay for your products or services. Some tools to help you accept these payment types (for a small fee) are Paypal.com which will allow you to accept online payments and stripe.com or square.com which will allow you to accept direct credit card payments.
4. Create a budget & track everything
Similar to your personal finances, you want to make sure you have a business budget in place and that you track all of your business spending and expenses. Some really awesome tools to help you do this are outright.com or freshbooks.com. Both of these are online cloud accounting tools that allow you to track your revenue, sales, expenses, invoices, estimated taxes owed to the government etc all in one place. I personally use outright.com and I love it.
5. Pay your business taxes quarterly
In addition, as a legally registered small business you'll need to take into consideration the fact that you'll have to pay taxes (i.e. self employed and business taxes). Since you are getting paid directly from your customers for your products or services you are going to have to take taxes out of your business revenue to pay the government. A really good way to plan for this accordingly is by paying estimated quarterly taxes using IRS form 1040 ES (click here) this way at the end of the year you are not sending a large chunk of money back to the government.
One of the keys to your small business success is making sure you manage your business finances properly. Get started on it today.
Bola Sokunbi is the founder of Clever Girl Finance and she's passionate about helping women take control of their money so they can live life on their own terms.