Whether you have recently set up a small business or you’re in the early stages of ideation, there are some important items to put on the agenda. Tax might not be the most appealing part of business ownership, but it’s an important aspect to get right, so maintain strong accounts.
The first thing you should do when setting up a small business is to separate the personal and business financial accounts. This might seem like unnecessary work at the start, but you will appreciate the effort when the tax year comes to an end. It is also needed for some setups.
When you’re personal, and business accounts are comingled, it’s harder for you to track taxable income and outgoings; this makes it more challenging to pay the right tax and increases the risks of an investigation. Always have a separate account for regular business transactions.
There are two ways to organize your taxes; you can pay them all at once and at the end of the tax year – this is feasible if you have a consistent income and know roughly how much your taxes will cost – alternatively, you will have to put the right tax amount aside each trading month.
If you are financially savvy, you can do this yourself; otherwise, try to partner with a financial advisor to ensure that your taxes are under control throughout the year. Each month look at how much revenue your brought and subtract the expenses. Move 25-30% into another account.
Chances are you need invoices for your business; not only are invoices needed to keep your tax records updated, but they are also needed for obtaining payments from clients and keeping a record of all transactions. There are effective and less effective ways to issue invoices to clients.
One of the most efficient invoice methods is an automated invoice that generates requests automatically, ensuring that your records and revenues are uniform and up-to-date. For more information about AP invoices, contact OnPay Solutions to find out about automated services.
As businesses grow in size and revenue, their profits become more consistent, and they encounter cash flow issues less often, but that is not the case with smaller businesses. In the beginning, smaller businesses need some financing assistance to maintain a steady cash flow.
Most financial advisors would recommend finding a line of credit for your small business even if you don’t need one right away. Establishing a line of credit is a way of securing your cash flow should the unexpected happen and keeping your operation running in the face of uncertainty.
Finally, make sure you have a filing system or multiple filing systems set up in order to stay organized and official. Some of the filing you should think about include accounting and record keeping, bank statements and contracts, permits and licenses, employee records, vendor records, and tax papers. If this sounds like a lot, don’t worry; there are apps you can find online.