5 Tips that Help Small Businesses Track their Finances

Every successful corporation today once started out as a small business. There are different definitions as to what constitutes a small business. Some people refer to small businesses as companies with less than 500 employees. There are approximately 28 million small businesses in the U.S, with 543,000 starting every month. Starting a small business is a journey that many begin but fall off along the way. Statistics show that 70 percent of businesses started every year run for at least two years before the owners close them down. 50 percent of the enterprises run for five years, 33 percent for ten years and 25 percent continue running for 15 years.

In the U.S., starting a small business is quite easy, and it will take five days only. However, as easy as it is, the problem arises when it comes to managing finances. Many small business owners close down their businesses because of the lack of a proper financial management. However, the tips as discussed below can help small business owners track their business finances.

Tips for Small Businesses to Track their Finances

Have an account for your business

Many sole proprietors tend to mix their accounts with their business bank account which is an error. Having a joint account will tempt you to use the business finances for personal needs. Put all your business finances in a business bank account and access it only when you need to make purchases for the business. It will also help you build your business credit.

Incorporate a tracking software to keep up with your business purchases

Accounting software can help make things easier when it comes to preparing of tax forms. This software works by creating an expense category and linking it to the items on your tax forms.

Incorporating such software can help you keep up with the financial situation in your business. You can efficiently analyze the profit and loss margins and determine the areas that need a change.

Cut on cost

Humans have a weakness of spending more than they can afford. Some people have this weakness when it comes to their business. They may strain the financial position of the company by burdening it with too many expenses. In business, there is a fixed cost and a variable cost. A fixed cost does not change but remains constant regardless of the financial situation. On the other hand, the variable cost can vary, and this is the area you might want to cut down. A good example is, instead of paying for advertisers to market your business, you can use social media platforms such as Facebook, Twitter, and Instagram to sell yourself. You can also run a blog which easily attracts a significant number of customers.

Monitor your finances and the performance of your business

You can monitor finances through financial consolidation which is a process that involves combining financial data within the business or organization. Ensure you are up to date with every spending that is going on in your business. Keep up with the financial performance and compare them with the previous fiscal statements. Doing this will help you determine whether the company is going in the right direction.

Hire a Finance Professional

Handling finances may be a daunting task, and sometimes it is helpful to bring in a professional. Accountants have an in-depth knowledge of tax laws which may save you tons of money. Having an accountant handle your finances will not only save you time, but they will provide insight on whether your business is doing well.

Conclusion

Having a business to call your own provides a feeling of pride. However, having your business bring back good returns is an accomplishment that brings delight to many. Small businesses play a significant role in boosting a country’s economy. In the U.S alone, small businesses bring in revenue of $989.6 billion which is a big figure. Therefore the future of small businesses is bright.