Managing your finances can be a daunting task, particularly for entrepreneurs who are just starting out in business. A firm grasp of financial literacy and taking advice from those who’ve achieved success in the past are key elements to this. David Quinn, CEO of Bluevine, recently shared some insights to help you manage your finances more confidently and effectively.
Negotiation and reviewing expenses
Always negotiate to get a better price. Getting in the habit of doing this can create significant savings for any business. Review expenses regularly to see where you can negotiate with vendors. This attention to detail can also uncover areas where costs can be cut or eliminated, creating long-term savings that will increase the profitability of your company.
Keep business and personal finances separate
This can be particularly difficult for sole proprietors in startup mode. The lines blur easily between personal money and business money, so it’s best to keep separate accounts to avoid the confusion. If you want to invest money into the business, do it as a business transaction and don’t simply move cash back and forth. The IRS frowns on that type of thing.
Understand taxes and tax responsibilities
Taxes are part of doing business. They are not optional, but they can be reduced if you understand deductions and credits. Doing your own taxes when you’re a small business owner is not recommended. Instead, hire a professional and consider the accounting fees part of the cost of doing business. Those fees are deductible, so the expense can be well worth it.
Tap into financial literacy resources
There are several online resources for learning more about financial literacy, including the Bluevine blog. There’s also a wealth of financial literacy information available from the Small Business Administration (SBA) and the Federal Deposit Insurance Corporation (FDIC). Delve into these regularly to keep yourself up to date on financial concepts.
Analyze your business dynamics
Understanding the dynamics of your business is critical to achieving long-term success. Develop stress tests that can reveal your financial strengths and weaknesses. If costs go up and you choose not to pass those costs on to customers by strategically raising prices, understand the impact that will have on profitability. You must always make sure your cash flow remains positive.
Invest in the right technology
Use accounting software to organize expenses and finances. This will help you get ready for tax day. Look for software that connects to other technology you’re already using. For instance, you could save a lot of time if your business checking account and accounting software automatically sync transaction data.
