As more people see the benefits of entrepreneurship, they’re taking the dive, registering LLCs and getting their small businesses off of the ground. It’s a great way to build wealth and leave a legacy for children in the future. However, there’s one component that tends to get a lot of small business owners in trouble. Poor money management is something that can literally derail a company into the ground. In some cases, a failure to report taxes is the blame. In other cases, a person might’ve failed to put the right person in charge of managing the finances. No matter what, there are a few ways any company can become intentional when it comes to managing business finance. Follow these tips to get started.
- Always pay taxes
Don’t allow taxes to be the one thing that gets your company stuck. If you’re confused on how to handle small business tax in your state, a quick Google search will get you started. Create a separate account and when you make a sale, always take out the designated percentage. Take that designated percentage and place it in the separate account. Once it’ts tax time, you won’t find yourself in trouble. If you can’t wait a full year, the government allows payment on a quarterly basis. This is an even better way to stay in the good graces of Uncle Sam. Once you can afford it, it’s wise to hire an accountant to handle the details of the tax payments. You could receive a lot of tax breaks as a small business owner and you don’t want to miss out on saving some extra cash. If you’re concerned about what to do from a legal standpoint or find yourself in trouble, consider contacting Tully Rinckey or another lawyer in your area. Tully Ricnkey Law is a special firm that offers a range of services including business law.
- Reinvest in the business
Many times, small business owners already practice poor money management at home. This poor habit tends to bleed over into their business. On a personal level, if you want your money to grow, it’s important to invest it in things that will help it grow. Stocks, mutual funds and real estate are a few ways to invest your personal finances to help them increase over a period of time. The same concept applies to your business. However, in this case, it’s important to reinvest the money back into your business. The business is already standing as its own investment and has the potential to profit. If you didn’t believe this, you wouldn’t have gone into business. However, too many entrepreneurs make the mistake of taking the extra profit only to spend it on frivolous personal items. Instead, it’s wise to reinvest at least 20% of the profits back into the business. Whether the money is going to purchase more equipment, advertising or new staff, it’s wise to reinvest to help the business grow.
- Make sure the profit margin makes sense
A wise person once said that “if it doesn’t make dollars, it doesn’t make sense.” Most businesses are in operation for three years before they turn a profit. This isn’t the case with all business. Some start off debt-free and stay that way. However, it’s very beneficial to take a close look at your expenses, the products and/or services offered and the profit margin. If the gap isn’t wide enough, you’ll never be able to turn a profit. However, if the profit margin is too high and doesn’t match the product or service, you’ll struggle to get customers. Take an honest look at what your business offers, determine the value your company brings to the marketplace and charge accordingly.