Early in the pandemic, it was clear that the world was about to change. One thing that shifted was the number of people who began going into business for themselves. In 2023 alone, a record-breaking 5,481,437 new businesses were formed. Each new business owner may feel as though they have about a million things to get done, but when it comes to setting up business finances, there are only 10 they need to concentrate on.
1. Have a financial plan
It’s nearly impossible to run a small business without a plan outlining how you plan to handle your finances. This includes everything from invoicing and taxes to purchasing and inventory.
Your business plan doesn’t have to be set in stone. Just make sure you have an idea — based on what you know now — of how you would like to handle your business’s finances. You can always refine your plan as you become more familiar with how it all works.
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2. Come up with a budget
Just as you create a household budget, create a business budget you can stick with. Again, this plan is likely to change as you learn how much money your business takes in and pays out each month. But it’s still important to have a general idea of what to expect.
3. Prioritize tax payments
No budget is complete until tax payments have been factored in. Most businesses submit estimated tax payments quarterly, based on their earnings for that quarter. Failing to make quarterly payments can lead to penalties at tax time. To keep it simple, you can set up regular tax payments and budget for it as a standard operating expense.
4. Plan how you’re going to bill
Will customers need to pay as soon as they purchase a product or service, or will they have 30, 60, or 90 days to pay? Understanding your cash flow will help you develop a more accurate budget.
5. Track cash flow
Cash flow is what keeps your business afloat. Make sure you have enough money coming in to pay the bills going out. Proper cash flow is crucial to your business running smoothly.
6. Borrow carefully
If you don’t currently have enough money in a personal savings account to get your business off the ground, you may need to borrow money. While there’s nothing wrong with taking on debt to start a business, the less you borrow, the less stress you’ll have to pay it back.
7. Automate whenever possible
As a business owner, you can expect to be busy. Automating tasks can save you time that can be better spent elsewhere in your business. For example, accounting software can save you hours every month.
As your business gets off the ground, take time to learn more about the kinds of automation services that you can use.
8. Be prepared to grow
Your business requires two things to thrive: determination and a willingness to invest. For example, rather than giving yourself a raise or allowing profits to build up, consider investing some of that money back into the operation to help it grow.
That may mean offering a greater number of goods and services or expanding your territory. It may also mean putting more employees on payroll or improving your business’s infrastructure.
9. Continue to keep track
No matter how many business operations you’ve automated or how much you trust the people you’ve put in charge of accounts and finances, set time aside to go over the books in depth at least once a week. Sit down with your favorite drink and dive into the numbers. Doing so is the best way to spot waste or discrepancies. After all, it’s your business, and you’re ultimately responsible for whatever happens.
10. Keep your eyes on the future
Even if you’re in the first few months of operation, consider what you want your business to look like several years down the road. Do you want the business to be larger and more diversified? Do you hope to operate from a new facility? Are you noticing any broader trends that may impact your business? Keeping one foot in the present and one in the future gives you a better chance of being ready for whatever comes your way.
Owning a business is not easy, but few things are more satisfying. The steps you take from day one can help determine your experiences as a business owner.
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