Increasing your bottom line isn’t always about raising prices or bringing in new clients. A big part of a small business’s financial health that often gets overlooked is wisely managing the money you already have. Smart financial management can make a huge difference for your profit margins, so we recommend getting into these four healthy habits as you move forward:
1. Have a budget in place.
Did you know that less than half of small businesses actually have a budget in place? It shocks us too! This is one of the easiest ways to stay on top of your finances. A good approach is to develop your budget on a month-to-month basis. Set aside a day at the end of each month to see how budgeting went and make any necessary adjustments to your plan. If you’re overwhelmed, that’s okay. Consult with a financial advisor and you’ll likely get a lot more clarity on how you should and shouldn’t be spending. A good budget keeps you in control and helps you make more informed decisions about where your money goes.
2. Set aside enough money for taxes.
Don’t let taxes sneak up on you. Many people make the mistake of assuming they’ll cross that bridge when they get to it. Income taxes and employment taxes can be a huge obligation and you need to be prepared unless you want to face expensive penalties with the IRS.
3. Pay yourself a set salary.
If you’re a business owner, you shouldn’t just take whatever money you want or need from your business as you go. Getting a set salary has a lot of benefits. It helps you think about your business and personal assets differently. It can also be beneficial for tax implications and liabilities.
4. Pay off debts.
While it can be good for your credit to have a little debt, in general you need to be very proactive and careful about paying it off. Make more than the minimum payment when you have lines of credit or equipment loans. This will help you cut down on interest and other fees.
Having some debt can be a good thing, but debt in general costs money. Making more than just the minimum payments on credit lines and equipment loans can cut down significantly on the overall fees and interest you must pay to keep these debts going on a monthly basis.
Who can help me with the financial and legal side of my business?
If you have questions about the legal side of financially managing your business, The Hedtke Law Group is here to help. If you are experiencing major financial difficulty, like so many are in these times, we can provide you with the guidance you need. Contact us today.