Starting your own business is exciting! You have many ideas and plans for the future.
But, there are also the not-so-fun things. For many, this includes budgeting, taxes and payroll. Here are a few budgeting tips that will help you keep your finances in good order. Implement them today so you can spend more time focusing on pursuing your passion.
1. Create a list of non-negotiable expenses.
It's essential to know what bills you will have recurring monthly and annually. Rent and internet bills are due monthly and usually stay the same. Business insurance is usually paid once a year. Budget for this expense by putting aside 1/12 of the payment each month. Non-negotiable items include staff, transportation and marketing, but not coffee and lunches out. And don't forget to include your own salary! Once you have this list, you'll know how much you have to earn each month.
2. Use a zero-based budget.
Using a zero-based budget is the best way to keep from getting into debt. At the top of your paper you list your income from the previous month. Then subtract all expenses. The number you have left is what you can use for other things.
3. Keep a retained earnings account.
This is not your business emergency fund. That's for true emergencies. You can use retained earnings for things that will help you grow. Say you have a lawn care business, and plan to add another team member in a few months and will need some tools. One day you run across a sale that has the tools you're looking for at excellent prices.
Since you have retained earnings, you can jump on this great deal without any worry about the cost. The amount you have in here will depend on what kind of business you are in, and it will fluctuate. Aim to add 10% of your monthly revenue to this fund.
4. Remember that time is money.
Starting out, it's tempting to take a DIY approach to things. This isn't always best. Maybe you can create a logo on your computer, or set up a simple website, but when it comes to other things, let a professional handle it. Fixing up the miscellaneous issues in your rented office space? Hire a handy man to do that. Need advice on business insurance? Contact an agent. You can use that time to find and serve clients.
Use these tips as you set up your business accounting. You'll find it easier to keep track of where money's going. Plus it will help you sail through the good financial times and weather the tough ones.
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Looking for more tips on how to manage your business? Check out these other articles:
Business Insurance and Inventory Protection: How to File a Claim
How to Protect Your Business with Insurance
Is it Time to Evaluate Your Business for Security Risks?