November 14, 2017
Chances are you’ve heard something from a founder along these lines:
“I love coming up with the strategy, I don’t enjoy taking care of the money part or thinking about all the ins and outs of getting the new client onboarded, for example. I am a person whose job is to have a vision and I tackle big problems. I cannot be bothered with finances.”
Finances isn’t every early-stage founder’s strength until they got in a situation that they had to learn how to manage them. However, finances and sales are the soft skills that make or break your business.
Dare I say, this is exactly the type of small business owners whose eventual financial situation (and a not proactive financial approach) will make them learn about doing it right.
If you want to take the easier way and not fall in the same trap, here are some tips and advice that will help you get there.
In the era of non-financial entrepreneurs, finance apps have taken over a lot of a headover for us. Apps like Quickbooks or Mint can easily manage small-business accounting for you. These apps become useful especially in cases when you have to send a couple of invoices and track some expenses you have.
No, you are not alone. There is at least a ton of us around here who procrastinated at least some time during the day. In some cases, procrastination can do you a lot of good, but when it comes to business, it’s best to stay organized early on.
One of the crucial things when expanding your business is certainly not procrastinating when your money is in question.
At The Wallet Genius they said that: “One tip for starting a business is to be super organized early on. We highly recommend keeping rigorous track of your business expenses and revenues. This will not only help you monitor your progress, but it will also help you develop clarity and peace of mind as you expand your business.”
Extra Tax Deductions
Taxes. The one certain thing next to death. Nobody likes filing for taxes, but when a business owner smells tax deductions, he becomes all ears.
As the owner of Femme Frugality has put it “… If you run a sole proprietorship, look for extra tax deductions. Two big ones being health insurance premiums and MI&E when you’re traveling – which is the equivalent of the per diem the average employer would distribute.”
One of the most used cautionary tips given to small businesses and young startups is to understand their business’ seasonal cash flow. CashTheChecks, gives a great example of this,
“Whether you’re a tax preparer or run a flower shop, you’re sure to experience ups and downs throughout the year. This is why it’s important to have three to four months’ worth of cash saved up for slower periods.”
You should also be aware of the different sales cycles your business has. Just take a look at how quickly you go from the visitor who first landed on your site to a customer.
If you sell pens that cost $2 each, your sales cycle is most likely fast enough that you don’t have to worry a lot about the cash buffer.
However, if you’re running a B2B company, it’s highly likely that your sales cycle lasts for months. This is where having a cash buffer really is important, especially if there’s a long period before revenue from the previous cycle.
If you are to wait for tax time to figure out exactly how much you need, then you are on the wrong track.
Small business owners should save more for taxes than they think! It’s better to have more in savings come tax time.
“I’ve personally depleted my emergency fund to pay my tax bill because I didn’t save enough.” Melanie, a small business owner said. “Not fun! Always save more! “.
While trusting your instincts and doing what your gut feeling tells you to do certainly has it’s pluses, try doing some math first. You can read tips from people who are experienced in what you are going through now, talk to dozens of financial advisors but ultimately, it is you who decides. You are the one who has to take the business the right way. Never fail to educate yourself when you get the chance and once you do that – there’s place for trusting your gut feeling and moving forward faster than ever.
Read more tips on managing cash flow and finances on TechCo
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