Starting and running a business is not easy, or simple. Anyone who tells you that is wrong. Maybe it’s easy to perform your duties. Perhaps it’s easy to do something you love, and get paid for it, but there is a lot more that goes into running a business than just doing your “job”. Many times, financial issues cause serious problems for businesses. If you are aware in advance of the issues that might affect you, you’ll be ahead of the rest.
Understanding the Financials – Each industry has its own rules and commonalities when it comes to bookkeeping and finances. Read reliable information about your specific industry and get advice from only professionals in the accounting industry, not your best friend’s cousin who once worked for a CPA.
Paying Taxes – Believe it or not, some successful businesses actually end up going out of business due to the failure to pay their taxes in a timely manner. It’s important to understand how self-employment taxes work, and how you pay quarterly taxes, as well as the pitfalls of not doing it.
Cash Flow – Very small businesses usually do not have the large cash or credit resources to deal with slow cash flow. Therefore, it’s imperative that a small business owner be prepared for issues with collecting money and cash flow. When you get a big payout, don’t spend it all; figure out how to budget what you get for the months when you get little or nothing.
Managing Money – This is an outflow of cash flow, but you must set up a budget and live off that and not put your hands in the drawer willy-nilly. It takes time for a business to be profitable, and if you keep putting your hand in the till you will never be profitable.
Getting Paid on Time – The first part of getting paid on time is having a solid contract and understanding with the client about when and how you’ll be paid. The other is having an easy-to-use invoicing system to send out timely invoices.
Getting Paid a Fair Price – The bottom line is, don’t undervalue your products or services. Charge what you deserve to be paid, and then you will remain joyful about the work that you do. If you under-price yourself, your finances will suffer and resentment will grow.
Anchor Clients – Business owners have to be careful, especially service businesses, not to have one client that pays them most of their money. Good financial software can help you determine what percentage each client is paying so that you can expand to avoid any one client being an anchor client.
Too Much “Office” Work – The bane of any business owner’s existence is unpaid work such as data entry, filing, and even marketing. One way to avoid this problem is to automate most of the financial processes with the right software.
Educating yourself about financial issues, bookkeeping, taxes and accounting, and then setting up a system to deal with these issues, will help you avoid many problems. In addition, using the right tools can help you more than almost anything, especially if some of it is automated to make it as simple as possible.