There are so many things to keep in mind when you own a small business. Details ranging from inventory to order fulfillment are just the baseline concerns. If you’re a brick and mortar business, your overhead includes a lease, utilities, and maybe additional employees. If you run an online business, your overhead includes the cost of parking your domain somewhere, maybe an email management system. Regardless of whatever kind of business you own, though, you will have to make sure your books are in order.
Keep it separated.
It’s true that you will spend money out-of-pocket to start your business. You’ll also most likely spend out-of-pocket to bolster up your business in the first few years. Until you start turning a profit, pretty much everything you have will go into the business.
In spite of what seems like an endless flow of your personal cash into supporting your business, though, you should still keep your personal finances and your business finances separate. Creating a separate business checking account is a good way to compartmentalize and organize your business. Not only is good accounting policy, it’s also a way to help you mentally compartmentalize and look at your business in a critical and objective way.
Anyone who starts a business has to have passion and drive. Without it, there’s little point to making all the necessary sacrifices. But the truth is, it’s just not enough to be passionate about your business idea. You have to be able to look at the business and make decisions as objectively as possible.
Keeping it as separate from your personal finances as possible is a solid first step towards helping yourself do this.
Pay attention to the kind of business credit you get.
Depending on the kind of business you started, you might need seed money to build inventory, or to float your overhead for the first few months — or longer. There are all kinds of options and all kinds of institutions that might be able to help you., from banks to credit unions to even crowd sourcing. Be sure you pick the one that’s right for you; and, if you can, at all costs, try to avoid seeding your business using a credit card. If you find yourself unable to pay it back, it could seriously hurt your chances to access other kinds of funding.
Keep it organized.
Disorganized record keeping is the death knell of small business. If you’re forward thinking enough, you already set how to organize and store your important records. But even if you didn’t think about that in the beginning, it’s not too late to start now. Take the time to go back through your records and organize them. Yes, it’s a pain. Yes, it takes time, which is a commodity that’s already in short supply. Yes, it means some headaches, depending on how long you’ve put off going through and organizing your records.
But it will be worth it. And, it’s also a good lesson for you that will have more good returns than bad.
Update your books on a regular basis… more than just monthly.
You are the heart and soul of your business. But your books are the blood and bones. Keeping your books up-to-date isn’t the sexiest way to spend an evening; but it will give you the confidence you need to make objective decisions.
It may seem like updating your books monthly would be enough, and it may well be enough for a well-established business. If you’re just starting out, however, the ebb and flow of your business isn’t all that stable. The more you put your eyes on your books, the better chances you have to succeed later. It’s not enough to keep your receipts. Add them in weekly, or even bi-weekly. Keep an eye on your receivables and sales. If your business has heavy overhead, it’s even more important that you update your books regularly.
Don’t confuse sales with profits.
You’ve made a few sales, satisfied a few clients, and gotten a few more. Good for you! But if you’re just starting out, be sure to remember that sales aren’t profits. You don’t get to call it profit until after you take out business expenses – if for no other reason than to take pressure off your personal pocketbook – and quarterly or annual taxes.
It’s good to be passionate and important to be excited about your business. But don’t start trying to roll around in profits before they actually start rolling in.
Don’t be afraid to consult a professional.
It’s okay to admit you’re over your head in certain aspects of your business. That doesn’t mean you have to throw in the towel. A smart business owner knows it’s important to sometimes find someone who knows a little more about some aspect of the business. Because in the end, owning a successful business is as much about learning and evolving as it is relying on common sense.
