Starting and running a business is not easy, or simple. Anyone who tells you that is wrong. Maybe it’s easy to perform your duties. Perhaps it’s easy to do something you love, and get paid for it, but there is a lot more that goes into running a business than just doing your “job”. Many times, financial issues cause serious problems for businesses. If you are aware in advance, of the issues that might affect you, you’ll be ahead of the others.
* Understanding the Financials - Each industry has its own rules and commonalities when it comes to bookkeeping and finances. Read reliable information about your specific industry and get advice from only professionals in the accounting industry, not your best friend’s cousin who once worked for a CPA. Let me know if you need a great CPA, I’d be happy to make a recommendation.
* Paying Taxes - Believe it or not, some successful businesses actually end up going out of business due to the failure to pay their taxes in a timely manner. It’s important to understand how self-employment taxes work, and how you pay quarterly taxes, as well as the pitfalls of not doing it. One of my first recommendations would be to hire a professional bookkeeper for your business. However, you need to make sure that you know when all taxes are due, you review all filings, and confirm any payments are made. It is your business on the line, not the bookkeepers - don’t stick your head in the sand. You can locate tax deadlines on your states Department of Revenue page and on the IRS website.
* Cash Flow - Very small businesses usually do not have the large cash or credit resources to deal with slow cash flow. Therefore, it’s imperative that a small business owner be prepared for issues with collecting money and cash flow. When you get a big payout, don’t spend it all; learn out how to budget what you earn for the months when you get little or nothing. It is equally important that you sock away part of your earning for taxes. Your awesome accountant will be able to tell you, with fairly accurate confidence, what percentage makes the most sense.
* Managing Money - This is the outflow of cash, but you must set up a budget and live off that and not put your hands in the drawer willy-nilly. It takes time for a business to be profitable, and if you keep putting your hand in the till you will never be profitable. With your budget you will be able to predict and prepare for expenses, tax payments, slow times and unexpected expenses.
* Getting Paid on Time - The first part of getting paid on time is having a solid contract and understanding with the client about when and how you’ll be paid. The other is having an easy-to-use invoicing system to send out timely invoices. I use 17Hats for my client management system and Teamwork Projects for my project management system. I love them both and would be happy to show you the ropes and help you get setup in each.
* Getting Paid a Fair Price - The bottom line is, don’t undervalue your products or services. Charge what you deserve to be paid, and then you will remain joyful about the work that you do. If you underprice yourself, your finances will suffer and resentment will grow. Do you know how much you should be charging? If you need an idea, check out my Rate Calculation Sheet, it is in no way perfect, but it will give you a good view in to what you should be charging.
* Anchor Clients - Business owners have to be careful, especially service businesses, not to have one client that pays them most of their money. Good financial software can help you determine what percentage each client is paying so that you can expand to avoid any one client being an anchor client.
* Too Much “Office” Work - The bane of any business owner’s existence is unpaid work such as data entry, filing, and even marketing. One way to avoid this problem is to automate most of the financial processes with the right software or outsource these tasks. As the small business owner, you best use of time is on revenue producing activities. Outsourcing these tasks may come at a cost, but the trade off for you being able to bring in more revenue can’t be beat. Take a look at The Many Ways an Administrative Consultant Can Support Your Business
Educating yourself about financial issues, bookkeeping, taxes and accounting, and then setting up a system to deal with these issues, will help you avoid many problems. In addition, using the right tools can help you more than almost anything, especially if some of it is automated to make it as simple as possible.