National Small Business Week

Last week, we celebrated National Small Business Week. Although the official time has passed, it remains an opportune time for small business owners to take a step back and ensure their finances are in order. Running a successful small business requires much more than just passion and hard work – it also demands fiscal discipline and smart money management. Here are a few key financial tips to help small businesses thrive:

Understand Cash Flow

The lifeblood of any business is cash flow. Failing to maintain positive cash flow is one of the top reasons small businesses go under. Implement practices like stringent invoicing, inventory management, and budgeting to ensure you always have enough money flowing in to cover expenses going out. Forecast cash flow regularly and line up lines of credit for unexpected shortfalls. It is better to have these in place and not need them than need them and not have them.

Separate Business and Personal Finances

It is crucial to keep your business and personal finances separate from day one. Open a dedicated business bank account and get a business credit card. Not only does this make accounting easier, but it protects your personal assets if your business faces legal or financial troubles down the road. In other words, treat your business like a business.

Plan for Tax Obligations

Unlike wage income, businesses do not have taxes automatically deducted. Set aside a portion of income each month into a separate “tax savings” account so you have sufficient funds when tax deadlines roll around. Work with an accountant to understand all applicable income, payroll, and sales tax requirements for your business and how that may impact your personal income tax return. Your accountant should also be able to provide tax projections throughout the year to update where you are and what strategies to consider lowering your overall tax burden. A successful tax plan should mean no surprises at tax filing time.

Invest in Your Own Retirement

While reinvesting profits into growing your business is wise, do not neglect your personal retirement savings, even as a business owner. Set up a tax-advantaged retirement account like a SEP IRA, SIMPLE IRA or solo 401(k) to start building your nest egg as soon as possible.

Owning a small business is immensely rewarding – but also comes with significant financial obligations and risks. By practicing disciplined money management from the start, you can go a long way towards achieving small business success.

Published in the Victoria Advocate.

Kyle W. Noack, CPA/CFP® is the Chief Executive Officer for Keller & Associates CPAs, PLLC and Keller Wealth Advisors.