Small Business Money Management: 4 Habits to Create a Healthy Financial Foundation

Every business wants to make a profit. Incorporating smart practices that eventually become habits can help you increase your profit margins in a significant way. To get the new year started off right, put the following habits into place now and make 2018 you and your business’s best year yet!

  1.     Create and Maintain a Budget

This tip may seem like a no-brainer, but less than half of small business owners actually have a business budget in place. You should develop your budget on a month-to-month basis and then take some time to review and revise at the end of each month. You may need to consult with a qualified financial advisor if you are overwhelmed with the idea of starting your budget.

Sticking to the budget can be the most challenging part, but it will help you keep control of your finances over the long run. It will also allow you make more informed financial decisions because you will know exactly where your company stands every month.

  1.     Save the Right Amount for Taxes

You should plan to set aside money for taxes, from income taxes to employment taxes. When small businesses are just getting started, they often make the mistake of assuming they can worry about tax obligations later. However, if you do not pay in or set aside money appropriately, you run the risk of having to pay interest and penalties for your obligation to the IRS. That is extra money you will have to pay to the government that you could have kept in your pocket or reinvested in your business.

  1.     Pay Yourself a Salary from Your Business Earnings

It can be tempting just to take out what you need from your business periodically. However, having a set salary is a good idea for a variety of reasons, including tax implications. You also avoid potential liability issues down the road as well. Setting up a salary forces you to think about your business and personal assets as two separate items—as you should!

  1.     Proactively Reduce Outstanding Debt

Having some debt can be a good thing, but debt in general costs money. Making more than just the minimum payments on credit lines and equipment loans can cut down significantly on the overall fees and interest you must pay to keep these debts going on a monthly basis.

You should also thoroughly think through any opportunity to take on additional debt. Generally, keeping debt to a minimum overall is a good idea. If you need to take on more debt, develop a repayment plan that will work for your business before you even sign the paperwork.

Good financial habits can make or break a budding small business. If you have questions about how you can make good financial decisions that will support your company in the long run, we can help. We’ve helped many business, small and large. Give us a call at (248) 246-1166 to set up an appointment today!