Starting a business requires a lot of preparation and hard work in your chosen field. In addition, you need to ensure that you properly set up your budget so that your finances run smoothly. Of course, it is always best to hire a Bookkeeper or Accountant, but there are other things that you can do to stay on track from day-to-day.
Keep your personal finances and your business finances separate. It may be more convenient to blend the two at first, but it could create confusion in the long run. It’s important not to blur the lines between personal and business spending and earnings. That’s the only way you can be clear on whether the business is truly profitable.
Consistently track your expenses. This goes beyond just saving receipts. Have an ongoing written record of your expenses each day so you can plan and prepare for how to allocate your earnings. No expense is too big or small, so record everything from rent and wages, right down to paperclips!
Save as you go. If there is a major expenditure coming up, plan to save a little each month until you reach your goal. It’s surprising how quickly those savings will add up! Continuous savings is the best way to soften the hit of purchasing a big-ticket item.
Put money aside to pay HST and income tax. This may be one of the most overlooked practices, yet it has the most impact on your cash flow, come tax time. It’s easier to save up for taxes on a regular basis than it is to come up with a huge sum of money all at once when taxes are due.
Keep a reserve for unexpected costs. The practice of saving a portion of your income also applies to unforeseen expenses such as equipment breakdown. It’s always wise to have a reserve to fall back on and it will help prevent suddenly going into debt to pay for something major.
Seek out ways to cut costs. Being frugal is an important strategy for keeping spending under control. When possible, avoid unnecessary expenditures, or buy second-hand equipment or furniture to save some cash.