Starting a small business is a dream for many. And while it’s easy to get distracted by your creativity, passion, and ambition, finances are the most fundamental aspect of starting a business that succeeds.
Here’s how you build a solid financial foundation both in the present moment, and for years to come.
Confronting your finances can be uncomfortable, especially as a business with employees and partners who rely on you. But the earlier you can understand your finances, the sooner you can establish important financial goals. Plus, having an open mindset about money can ensure that you keep your business and personal finances separate.
It’s important to track the following small business metrics:
Operating cash cycle
Profits and losses
Employee value generation
When you’re clear on these metrics—and how they impact your bottom line, you’ll be in a much better place to scale as your company grows in the future.
Some people wait until the last minute to file their taxes without any repercussions, since they only have one employer. Small business taxes are different. It’s not possible to wait until the last minute to think about your taxes because you’ll need to save for them throughout the year. You might also be paying them quarterly, depending on your circumstances.
Another way to get ahead of your taxes is to keep detailed records of the business items you want to expense, which will reduce the amount of money you owe. Get clear on which items are eligible for small business tax deductions so you can accurately record them throughout the year.
Business credit is one of the greatest assets small businesses have–and many entrepreneurs don’t even know they have it. Similar to personal credit, business credit is helpful for taking out loans, financing high-expense items, and securing good terms with banks and vendors.
Yet business credit is entirely separate from personal credit, and establishing and building business credit is an essential step for your company’s financial future. For example, establishing an LLC, getting a federal employer identification number (EIN), and opening a business bank account are all steps that can help you start building business credit.
You can also open a credit card with suppliers that you use often, such as a shipping service or material provider, since you’ll need their services indefinitely.
Businesses that take time to streamline their financial reporting are exponentially more successful than those who don’t. Why? Because manual expense management can be time-consuming when done manually, and relying on manual financial reporting opens up room for human error.
In contrast, outsourcing these services to a professional team and software tool ensures you’re not missing any part of the picture. Whether it’s tracking expenses across multiple websites, or understanding revenue growth month over month, having a streamlined system in place is key.
Expense management is also important because it helps your business monitor inventory, track assets, and establish a budget. This minimizes expenses, which directly translates to more revenue.
Companies that want to succeed financially must take a number of steps to prepare for the future. Most importantly, small businesses need technology tools that provide real-time insight into their finances. Learn more about how CALCUL8 can help you harness data to streamline financial reporting, establish a strategic vision, and make your business more competitive.