If improving your financial literacy is once again sitting at the top of your resolutions list, threatening to go the way of last year’s unused gym membership, dive in and finally check it off for good. Here are smart ways to organize your small business finances this year.
After all, prioritizing your financials means prioritizing your business growth. Separating your business and personal finances with a dedicated bank account and accounting system may be the single most important goal you set!
Our new milestone, Organize Your Finances, will help you get started. Here are five ways to organize your small business finances.
1. Open a Business Bank Account (and Get the Most Out of It)
There’s no one-size-fits-all when it comes to business banking these days. Traditional, local, and online banks offer an array of services and add-ons tailored to small business owners.
Our guide will help you determine the considerations and services that matter most to you and choose a bank that meets those needs, whether that’s seeking out 24/7 instant account access, low or no fees, or a physical branch run by a banker you know and trust.
2. Invest in Bookkeeping and Accounting Tools
Did you know that a majority of small businesses do accounting in-house? Are you… ahem… one of these small businesses? Here are the best tools for managing your finances in the year ahead:
For bookkeeping needs:
- Pilot
- Bench
- Wave
- QuickBooks Live Bookkeeping
For accounting needs:
- QuickBooks Online
- Freshbooks
- Xero
3. Build a Business Budget (Especially if You’re Brand New)
We know. We know. Creating even the simplest budget can be downright intimidating. Thankfully, accounting platforms (like QuickBooks Online and Freshbooks) integrate budgeting and forecasting tools, but early-stage businesses may still find it difficult without sales data to work off of.
Follow our guide to simplify the process and learn where you can find estimates to plug into your forecast if you’re just starting out, including:
- SBA’s startup cost estimator tool
- Trusted online publications related to your business’ industry, niche, and size
- Industry-related associations and member organizations
- Contacts and mentors within your network
Let’s get to it!
4. Know the Cost of Taking an Owner’s Draw
Taking an owner’s draw is the easiest way for solopreneurs to get paid. It’s as simple as writing a check to yourself from your business account, but wait!
Make sure you’re familiar with these stipulations before you do so:
- You can’t take any amount you want. Your owner’s draw is limited to your equity in the business.
- Taxes aren’t automatically taken out. You’ll have to self-report your draws and pay federal, state and local income taxes, self-employment taxes, and potentially estimated quarterly taxes on them)
5. Pay Your Bills No Matter What
It typically takes two years for a business to turn a profit, so how do you pay your business and personal bills with no income?
Here are some creative ways to keep the lights on:
- Treat your business like a side hustle to guarantee a profit stream
- Bootstrap (rely on savings or sweat equity)
- Seek micro-loans from friends and family
- Crowdfund with platforms like Kickstarter, IndieGoGo, or GoFundMe
Find more ways to pay your bills in our Determine How To Pay Yourself guide.
At Hello Alice, we believe 2022 is The Year of (Your) Small Business! Start it off right by getting your finances in order and ensuring you’ll have everything in order come tax season. You’ve got this!
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