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Managing Small Business Finances – An Introductory Guide for Entrepreneurs

Guest Writer – Chelsea Lamb from Business Pop


As a small business owner, you have to wear many hats. When you’re first getting your company off the ground, you’ll likely handle everything from marketing to management, hiring—and financials. For many new entrepreneurs, the financial side of running a business is one of the most daunting tasks they’ll face. Don’t let money matters intimidate you. With a bit of education and effort, you can become your very own CFO. This guide provides actionable tips for managing small business finances, even if this field isn’t your strong suit.


Determine your tax obligations


The first step when starting a business is figuring out your tax obligations and reporting requirements. If you fail to pay the proper business taxes, you could get audited by the Internal Revenue Service. Plus, missteps in tax filing can result in fines, which you definitely don’t want to deal with. Check with the IRS to see what your business taxes are. There are also consultants like Incite Tax who can help you minimize your tax burden with personalized tax planning, saving you money in the long run.


Create an LLC to simplify your financial admin


Your tax obligations will depend in part on what type of business structure you set up. A limited liability company, LLC, is one popular option among small business owners. LLCs offer distinct advantages, as they protect your personal liability in case your business faces legal troubles, simplify your bookkeeping and tax filing, and generally reduce administrative burden. Requirements for LLC formation vary by state, so check your local legislation before proceeding. A business formation service can help you with the setup process in Utah.


Select a clear accounting method


Before your business even commences operations, it’s smart to have a predefined accounting method in place. This will determine how you oversee and manage your overhead costs and expenses, and will make things like tax filing easier in the future. There are different accounting methods to choose from, notably a cash-basis versus accrual-basis approach.


Figure out how to manage payroll


Your employees are the glue that holds your business together, as they’re responsible for ensuring everyday tasks are completed. You want to make sure they’re paid on time and in full. Towards this end, you need to set up a comprehensive payroll system. Payroll doesn’t necessarily mean paying basic wages. You also have to consider points like Social Security deductions, for example. This guide takes you through the entire process, from calculating withholdings to cutting the actual checks.


Create an inventory management system


If you run an inventory-based business, you also need a strict inventory management system. Your inventory is worth a lot of money, so you want to keep an eye on it and minimize the risk of losses through theft, damage, or other incidents. Luckily, there are many handy tools you can use to help track inventory. For example, software may work with scannable barcodes. So, each piece of inventory has a barcode that you scan to track in real-time.


Implement the Profit First cash flow management system


Ideally, your business will make plenty of revenue and cash flow will be enough so you can always cover your expenses. In reality, business success fluctuates. External factors that you can’t control, from supply chain issues to bad weather and global pandemics, can impact your profits and cash flow. This is why Profit First is so critical, as it puts boundaries around your cash to keep your expenses in check and has built-in savings accounts for important things like taxes, profit and team member expenses. Benefits include greater freedom and control over your finances, plus added peace of mind knowing that you have source of cash to fall back on in case of tough times.


Get the software you need to simplify your finances


Managing the various financial aspects of your business operations, from bookkeeping to tax filing, payroll, and more can be a lot. Don’t sweat it. The good news is that there are cutting-edge tools to make money management easier at every step. Investing in a good software product upfront can save you time, stress, and even money down the line. Some products popularly used by small businesses include Sage, Wave, and Xero. These are straightforward and user-friendly tools anyone can master.


Consider furthering your education


As you start to get into the nitty-gritty of financial management for your small business, you may find that there’s a lot to learn. If you’re feeling overwhelmed, consider furthering your education to get the skills you need. A course in accounting or bookkeeping is a great start. You can find plenty of material for free online. Alternatively, you can enroll in a formal course and get a certificate. There are plenty of learning opportunities available, including online courses and in-person ones—for example, at community colleges.


Monitor your financials regularly


As a small business owner, the last thing you want is surprises when it comes to your financial status. Finding out that you’re running late on employee salary payments or that you have thousands of dollars of unpaid invoices outstanding is no fun. To avoid nasty surprises, make sure to monitor your money regularly. Don’t just wait until the end of the year to do one big wrap-up of your bookkeeping and tax filing. We recommend bi-monthly. If that doesn’t work, once a week at most or once a month at least are fine.


Know when to ask for help


As a small business owner, you’re probably used to doing it all yourself. However, sometimes trying to DIY everything in business can backfire. If you’re struggling with financial management or simply don’t have the time to do it yourself, consider outsourcing jobs like those above to experts. Girlboss provides a roundup of the types of money experts you might consult, from accountants to debt counselors. Entrusting your finances to an expert can free up your time to focus on other business competencies.


Managing small business finances is a critical component of ownership. If you’re a new entrepreneur, this can be daunting at first. The above guide can help you find your way.


Your best option now is to schedule a no-obligation call with Incite and we’ll tell you what we can and can’t do for you and your business. No BS.



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