Being smart with money is always important. Unfortunately, only 25% of small business owners adopt smart financial habits. Those 25% also consistently outperform the competition when it comes annual revenues. Worry not – with these tips, you can easily adopt smart money habits, too.
1. Don’t discount the importance of a budget.
Your budget helps set the expectations for the business. An annual budget is standard, but opting for quarterly and even monthly budgets will help you to make more informed decisions. You can compare the budget to your actual business results on a monthly basis to determine if any changes need to be made.
2. Set aside money for business taxes.
Although tax season has already come and gone for the year, it’s never too early to plan for the future. If you set aside money for taxes, you’ll have a more accurate (and realistic) picture of your company’s revenue and expenses. The rule that over half of small business owners go by: set aside the amount equal to 90% of your previous year’s business taxes. Or just remember this: nearly a third of every dollar earned goes to taxes.
3. Consistently review your finances.
One way to become smarter with money is to simply review your finances more. Most companies go through periods of both high and low demand. Having a better understanding of your finances lets you know when to make other important decisions, such as scaling your company.
4. Remember three words: money management discipline.
The same work ethic you used to start (and still use to run) your business is the same kind of ethic you must put into money management. For instance, if your business takes on debt, be sure to consistently make payments. Doing so will not only reduce the principal amount, but it will also help your company succeed long-term.
5. Make sure you have the best business structure.
Most small businesses are either sole proprietorships, partnerships, or LLCs. Whichever one your company is, it’s important to recognize the differences. More recently, the trend is to file as a LLC as it protects your personal assets. If you’re not sure which fit is right, be sure to check our other free small business resources and learn how you can save money with the best benefits package, too.