You started a business that has been a dream of yours for years. You did your homework and what you sell is in demand. Fast forward fifteen months, things aren’t good. You haven’t turned a profit yet since opening the business. You can’t afford to pay taxes due. The phone never stops ringing from creditors who want payment. Your stress and anxiety are at an all-time high. How did this happen? First-time business owners can make devastating financial mistakes. Here are a few things you can do to help your business.
- Be Realistic About Profits
Steady money doesn’t happen within a short amount of time when you open a business. It takes time to build a stable income much, less a profit. Be aware of this as you plan to pay your bills. Conduct a break-even analysis so you will have a good idea when you will start making a profit.
- Keep Your Personal and Business Funds Separate
Don’t mix your personal and business funds. The best practice is to keep these two funds separate for tax purposes. Mixing the two won’t give you a real idea of how your business is doing financially. If you seek out a business loan, it will be nearly impossible to show what your business is doing.
- Not Keeping Up With Bookkeeping
Bookkeeping isn’t fun but, you have to do it. Make sure you carve out time each week to update your bookkeeping. Use tools like QuickBooks to set yourself up for success. Don’t know how to use QuickBooks? Don’t worry SWVA Tax & Accounting can help you.
- Plan Your Taxes
You have to pay taxes as a business owner there, is no escaping it. Put funds aside to pay taxes to local, state, and federal governments. SWVA Tax & Accounting can help you develop a plan for tax payments.
- Get An Accountant
A good accountant will save you time and money. Working with one can help with payroll, preparing financial statements, and understanding the latest tax laws. Look no further than SWVA Tax & Accounting for all your business tax needs!
- Hire A Lawyer
A lawyer can help you get your business registered and structured that benefits you. They can review any contracts and other business documents you have.
- Have A Business Emergency Fund
Having a liquid source of cash can help cover business expenses for three to six months. This emergency fund can help keep your business stay afloat during difficult times.
- Business Insurance Is A Must
Business insurance helps fill the gap of things you didn’t see as accidents or theft. This is especially important if you are a sole prop since you will be 100% responsible for what happened. Get it and have peace of mind.
- Handling Business Debt
Business owners often go into debt operating a business, such as credit cards or business loans. Have a financial plan to pay debts off so you don’t drown in debt.
Mistakes cost business owners time and money, two things there is never enough of. Working with an accountant can make your business stronger. SWVA Tax & Accounting is a full-serve accounting firm specializing in the needs of small businesses. Call us today at 540-250-3198 or book an appointment today. We’ll run the numbers, while you run the business.
Do you have financial goals in life? Maybe you want to buy a house or get out of debt. If you need to achieve any financial goals, you’ll need a budget to get you there. A personal or business budget is a way to track your expenses and income for a set period, monthly is the most common. Don’t view budgeting as negative but as a means to achieve financial goals. Bear in mind there are multiple ways to make and keep a budget. Here are a few steps to get started.
Step 1. Find and Gather all Your Financial Paperwork
You will need:
- Bank statements
- Recent utility bills (electricity, water, gas, etc.)
- Monthly bills (mortgage, car, Netflix, student loan, etc.)
- Any receipts for the last three months
The more information you have the better so you know where your money is spent. This gives you a monthly average and a starting point.
- Add Up Your Income
How much is your monthly take-home pay on average? If you have income such as Social Security, stocks, pension, etc. that’s income. The best rule to follow is to use your net income when finding your average monthly income. You may have to go back three months to get an average.
- List Your Monthly Expenses
These are all the expenses you have each month. For example:
- Mortgage or rent
- Car Payment
- Credit Card Payment
- Dining Out
If you spent money, then it’s an expense. Use online banking, bank statements, and receipts to track your spending.
- Find Your Fixed and Variable Expenses
These two types of expenses are easy to determine. A fixed expense is something you pay the same amount each month. The best example is your monthly car or rent payment. A variable expense will change monthly as gas, groceries, eating out, utilities, etc. It’s best to find an average for each variable cost so you can know how much to estimate for each cost.
- Add Up Your Monthly Income and Expenses
This is usually the shocking part of making a budget for people. Don’t be surprised if your expenses are more than your monthly income. If your expenses are more than your income, you are likely overspending and will need to adjust your spending habits.
- Adjust Your Expenses
Now, you know what your average expenses are you can start looking for areas to trim or cut out completely. You can pack your lunch instead of eating out at work. Hit the sales rack instead of paying full price. You will be surprised where you can trim or cut expenses. It takes discipline and time to change how you spend money.
- Set Up Fun Money
Give yourself a little fun money to spend without feeling guilty about it. You could use it on dinner out or that watch you’ve been wanting. Keep this part of your budget reasonable, don’t overspend.
- Pay yourself First
When you get paid put money in a saving or rainy-day account. You want to build a nest egg so you can build wealth over time.
Setting up and sticking to a budget is will take time, effort, and energy. It could take anywhere from two to five months to get a budget working for you. You will need to track and keep up with what you spend your money on. A budget is a living document that will need adjustment each month. Take the time to make your budget now so you can achieve your financial goals. SWVA Tax & Accounting is here to help with all your financial needs. SWVA Tax & Accounting is a full-serve accounting firm that specializes in the needs of small businesses. Call us at 540-250-3198 or book online to get started today. We’ll run the numbers, while you run the business.