Running a small business can be one of the most exciting things you do. With all the freedom a small business provides, successfully managing both expectations and most importantly, finances can really keep you on the right track. Here are a few tips to leverage when managing your small business finances.
Separate Your Personal Finances From Your Business Finances
It is important to know that blurring the lines between personal and business is never a good idea. Your company is its own independent entity. Keeping your personal finances separated from your business will not only reduce problems in the long term but also make it easier to manage and keep track of your finances.
One of the main reasons you should separate your business from personal finances is for tax purposes. The IRS allows business owners to claim deductions for business-related expenses. In order to successfully claim deductions, you must provide clear documentation that indeed the expenses were indeed business-related.
Using your personal bank account to pay bills can be very risky. Instead, you can transfer money into an account in the name of your business as needed, which is called capitalizing your business.
If there is no clear distinction between you and your business, creditors are able to claim your personal assets in order to satisfy a debt so consider opening a business bank account ASAP if you haven’t done so already
Use a Business Credit Card
Opening and making regular payments on a business credit card can help begin to build your business credit. Having a good credit score affects your business’ ability to qualify for increased credit lines, loans, office leases, equipment, and better terms from vendors. In addition, business credit also impacts your business insurance cost. While there are a multitude of credit cards for which you can apply, we recommend reading our latest blog post to find the best business credit cards for your particular situation.
Pay Bills on Time
Missed or late payments on your business credit can have serious consequences. One of the most common penalties is late fees. The average cost for late fees on a credit card ranges from $26 to $39. Over time these fees can add up.
Making payments on time affects your credit score as well. In fact, 35% of your credit score is based on payment history. The graph below shows a breakdown of the different factors that can affect your business credit score.
Choose the Right Accounting Software
Managing your business accounting can be an overwhelming task especially if you are tracking documentation manually. Having accounting software eliminates the guesswork from bookkeeping. FINSYNC allows you to put your accounting on autopilot. FINSYNC syncs with the majority of US banks, credit unions and credit cards. Our all-in-one solution allows you to create customized reports, track income and expenses, accept payments, and automatically reconcile your accounts with the right invoices and bills.
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