Most of the small businesses that fail within the first two years do so because they run into serious financial problems. With the help of a financial expert, you can keep yourself from adding to these statistics.
More than 66 percent of the Americans dream of trying their hand in entrepreneurship. Naturally, they gravitate toward opening a small business. Such ambition is laudable and even encourages, but you need to tread carefully to avoid becoming part of the wrong statistics. The Small Business Administration reports that more than a third of the small businesses don’t survive past the first two years.
Unsurprisingly, money management challenges are often cited as the leading challenge facing first-time entrepreneurs. With the help of a provider of small business accounting, you can avoid some crippling money mistakes.
Create a business plan
This document serves as the blueprint that you use to structure business operations and measure progress. Many people overlook the need to create one thinking, albeit mistakenly, that you only need a business plan when fundraising.
A business plan is not a fundraising tool. Instead, it’s a road map that helps you to define operational and marketing milestones. The plan tells your business’s financial story from the first day of operation to the present day. When starting, you only need to make a financial projection for the next five years.
Setting monthly and quarterly goals help to keep you accountable during the first year. Goals are crucial to gathering insights into your business as they help you understand your strengths and shortcomings. You can use this feedback to shore up your weaknesses and play up your strong points.
Create a separate business account
It’s crucial that you create a business account as soon as you commence your business operations. It doesn’t matter whether you’re turning a profit or you’re just a freelancer. As long as you have an income that calls for you to declare a 1099, create a separate account for your business.
The key here is a separate account; you can create a different checking account dedicated to handling business transactions. The goal here is to track every cent that comes through the business. The ability to separate personal expenses from your business finances makes it easy to fill your taxes when the time comes.
Plan your tax liabilities
Ah, taxes. The thought of parting with your hard-earned money and paying it to the government is enough to get you bristled. Love them or hate them, fees are here to stay, and the sooner you accept that, the sooner you can stay out of trouble. The last thing that you want is to get on the wrong side of the Internal revenue service.
Installing accounting software makes it easy to track and manage your business finances. Alternatively, you can hire a professional to help set up a custom accounting process for your business. Such an approach can let you pay your tax liabilities quarterly and avoid getting flatfooted. It also ensures that you get familiar with the industry and state-specific taxes relevant to your business.
Many small businesses don’t make it past the first two years because they run into severe financial headwinds. Instead of taking chances with your hard-earned money, it’s better to have an accounting expert to guide your actions.