Business Finance 101: 8 Surefire Ways to Keep Track of Your Business Finances

The IRS says 40 percent of small and mid-sized businesses pay payroll tax penalties each year. The most common issue is missed and late payments.

Of course, payroll isn’t the only aspect of business finance you need to pay attention to. The situation illustrates why you need to keep tabs on your finances though. If payroll isn’t conducted properly, it could cost you.

The same is true of other aspects of your business finance. For example, late payments to vendors could result in late fees or other penalties. If you don’t report your business income the right way, the IRS might audit you.

Many business owners struggle with keeping their finances straight. There may not be time to keep things organized. You might find it difficult to understand some aspects of business tax.

If that’s the case, it’s time to get back to basics. Our article tours Business Finance 101, showing you eight ways to stay on top of your finances.

1. Keeping a Separate Bank Account is Business Finance 101

The first thing you should do is separate personal finances and business finances. Although this might seem like an extra cost or more administrative work, it will save you time later on.

Why is it so important to keep separate accounts? When you’re managing business finances, you don’t want the personal to get mixed up in the business side of things. This leads to confusion and takes you longer to sort out business-related expenses.

This can also lead to mistakes like overestimating expenses or claiming personal costs as write-offs.

2. Create a Revenue Forecast

The next thing to do in small business financial management is create a revenue forecast. This projection gives you an estimate of what funds you expect the business to bring in.

Many business owners see this as a waste of time. Your forecasts often change when you’re running a small business. A client may scale back their account or a large order may not come through.

The forecast document is still important, because it gives you an idea of what to expect and when to expect it. This helps you manage your expenditures most effectively. If you know you have a few low-income months coming up, you can prepare for them.

3. Understand Your Tax Obligations

As we said, the IRS has estimated about 40 percent of all SMBs are assessed payroll penalties every year. Better management of finances for small business can cure this problem.

The best thing you can do is read up on your tax obligations. You’ll have different tax responsibilities if you’re self-employed versus an employer.

A good understanding of how your business will be taxed can also show you opportunities. Maybe you’ve been thinking about technology upgrades, and a tax incentive seals the deal. Knowing what to expect also helps you prepare to meet your tax responsibilities.

4. Use the Right Software

If you’ve ever wondered about how to manage a small business, you’ve probably heard of a software solution. For almost any business management problem these says, there’s software.

Some of this software is worth its salt. Adopting financial management software or accounting software is a great idea.

How can you know you’ve got the right solution for your business? The experts at Stampli suggest you look for the following:

  • A clean, easy-to-understand management dashboard
  • Simple integration with the other software solutions you use
  • An interactive approval system

The right software helps you streamline everything from accounts payable to payroll.

5. Think about Financing Options

There comes a point when almost every successful SMB will need a cash injection. Most often, you’ll need to seek capital to expand the business.

You have plenty of financing options, from microlenders to big bank loans. Review your options and determine which one is right for you.

Keep in mind that your personal credit score has an effect on business borrowing. If your credit rating is less than stellar, there are things you can do to improve. By taking action now, you can prepare to submit loan applications in the future.

6. Review Your Costs

A fundamental part of how to manage business finances is looking at expenditures. Whether it’s paying for office space or buying supplies, your business needs to spend to get things done.

You need to keep a close eye on your expenses, since they can get out of hand. You may love your swanky new office space, but is it costing you too much?

Contractors, supplies, and more can all add up. Managing these costs will help you improve the bottom line.

7. Stay on Top of the Day-to-Day

The most common reason for payroll penalties is late or missed payments. This often happens because small business owners leave finance to the last second.

Most small business owners are busy people. Whether you’re self-employed or you have a few employees, you likely wear many hats. In this busy environment, tasks like finances can be pushed aside.

Staying on top of the day-to-day management of your business finances is key. Most financial tasks are more manageable when you take them one step at a time.

You’ll also be more accurate if you do things like record expenses when they happen. This can also help you stay on top of payments, so you can avoid those late fees.

8. Get a Helping Hand

Unless you’re an accountant yourself, there’s going to be a point where it makes sense to leave financial management to someone with more expertise. If you’re feeling overwhelmed, it might make sense to hire a bookkeeper or accountant to help out.

Don’t forget that you can consult with experts to get a helping hand with individual tasks.

Stay Ahead of the Financial Game

With Business Finance 101 under your belt, you’re ready to tackle business finance. If you still need a helping hand, don’t worry.

Our blog is chock-full of great tips about making and managing money. Check out some of our great articles for more.