These seven financial habits will equip small business owners with a new perspective to help you prepare for the future, without sacrificing your client relationships, craft or team.
Regularly review finances
Review your weekly and monthly financials regularly. It is an exercise in understanding the frequency and scale of your business operations and the extent to which your business may be growing or at risk due to clients who pay late.
Maintain a budget
Make a budget on the first day of the month to estimate how much income you will receive that month and how much you will pay out in expenses. Review the budget compared to actual results at the end of the month. Budgeting helps you make more informed about your decisions and identify potential problems before they occur.
Proactively reduce debt
You take on debt in the short-term to enable longer-term health and growth of your business. However, unnecessary debt is a drain on your business. Once you have business debt, it is important to make consistent payments, and proactively reduce the principal amount.
Pay yourself a salary from business earnings
Pull money out of your business account at regular intervals to set aside your personal income. When you pay yourself, it forces you to think about your business and your personal income separately.
Establish an optimal business structure for liability and taxes
Common business structures are sole proprietorships, partnerships, and corporations. Each structure has different legal and tax requirements. If you’re not sure which structure is best for your business, you may want to seek professional advice because of the expense involved in changing and maintaining a business structure.
Maximize tax write-offs and deductions
Take advantage of every tax benefit available to your business. If not doing so, it’s a disservice to your business. Write-offs and deductions reduce your taxable income and therefore reduce the amount you pay the government. Tax planning can feel like “gaming the system,” but it’s important to remember that it’s perfectly legal and adopted by all large businesses.