The inner entrepreneur in us is always dreaming of starting our own business. We may have dreams of launching a product line or a new service, but the finance aspect holds many of us back. Having a small business financial plan is essential to success. Here are 5 tips to starting your own small business financial plan:
- Have Separate Checking Accounts
Especially starting out, it’s easy to get your business finances and your personal finances intermingled. It can quickly become difficult to tell how much of your personal money has gone into the business and how much your new business has brought in. Having separate checking can help keep things separate.
- Keep Receipts Separate
Not all expenses can be written off as a business expense, so it’s important to know which is which and keep those receipts separate. This will come in handy during tax time or if you ever get audited.
- Have a Separate Phone, Vehicle, Etc.
This one may not be feasible, especially when first starting out. Certainly, having a separate phone number will help you look more professional. The more you can keep separated, the easier it will be to track personal expenses versus business expenses.
- Keep Track of Cash Flow
It’s not enough to look at profit. Many “profitable” businesses end up failing due to a lack of cash flow. It is essential to have cash on hand to cover expenses, pay employees, etc. Of all the tips for a small business financial plan, this one is a must.
- Build Credit Through the Business with an EIN
It can be tempting, and sometimes even necessary, to use your personal credit to get the business up and going. Having an EIN (Employee Identification Number) will enable you to keep your business credit and personal credit separate. Businesses don’t have quite the protection that regular consumers do, but by intermingling your personal and business credit, you risk bringing both down if you or the business struggle financially.
For more small business tips, check out our prior Money Minute: 4 Must-Know Personal Finance Tips for Small Business Owners .
To learn more about our 6-month Small Business Financial Coaching Program, email us at: firstname.lastname@example.org. Thanks to our partners, the program is completely free of charge for participants.