5 Steps to Managing Your Business Finances Like a CEO
When you’re starting a business, it’s so exciting and slightly scary, right? You’re overwhelmed with all these new things that you have to figure out and you’re also thrilled that you have to figure them out, amiright? That’s how I was too! Then there was this super scary thing that started happening, the money started to come in. I was thrilled! But, wait. How do I keep track of these funds? How do I pay my employees? What information does the IRS need to know when it comes to tax time? So many questions started rolling through my head – which is probably right where you’re at this very second. If I’m a mind reader, shout it out in the comments below!
When you’re a CEO of your company, you gotta run your finances like you’re a CEO of a company. Think big picture and don’t hesitate to make well calculated, educated, but risky decisions. You also need to make sure that keep track of your finances with meticulous accuracy because as a business owner, you’re more likely to be audited by the IRS. Good stuff, huh? So, be sure that you’re thinking about things in the long run.
Here’s the top 5 steps to managing your business finances like a CEO instead of a hobby business.
Know your overhead and what it takes to break even
What’s the bare minimum you need to successfully run your business. Be sure that you know this off the top of your head because that’s your financial goal each month. You need to make sure that you’re covering all your expenses from your business or your personal accounts, credit cards, or business loans start to take a hit. That’s something we never want!
Don’t be scared to invest
Investing can seem scary for some, heck – it’s scary to me most the time too! But, if there’s something you know will help your business then you need to seriously consider investing in that. For example, if you know that a business coach would help catapult your business in the right direction – then look at your finances and seriously consider if it’s feasible. Maybe you need a new logo or website and you know that people would be more inclined to purchase from you if you updated your site – do some research and take that leap! Invest in your business. If you’re just starting out and you don’t have much income coming in, then pick up a book or two (because all of this is tax deductible!) Be sure to strategically plan how long it will take you to recoup some of that initial investment. That’s an important factor to know. How long do you expect to be paying on that credit card or business loan? Or how long will your account be low? If it’s for a significant amount of time (over 6 months) – then consider a different approach or wait until your revenue is a bit higher. You don’t want to be in the red for too long!
Use tools like Freshbooks to keep track of finances
You’re an official business, it’s time that you tracked and invoiced your clients in a professional manner! Invest in a site like Freshbooks which handles everything for your business and even spits out a W2 form at the end that you need for tax purposes! Super handy tools like this are crucial to running your business like a boss. Plus, it starts at $15 per month! Now, talk about affordable!
Develop a routine and stick to it
When you’re treating your business, well, like a business – you need to make sure that you have systems and routines in place so it’s a consistent experience for every customer. Especially if you have repeat customers. You want to make sure that their experience is consistent each time to keep their trust in your company. This is especially important when it comes from the transfer of money from their wallet to yours. Freshbooks can help with this, because it’s one way to consistently send invoices to your clients.
Don’t forget about tax time
This is probably the most important thing when it comes to this post. If you don’t retain any other information but this, that would make me completely happy. You need to remember about tax season. With owning a business, you can either break it up into 1 payment to the IRS which is usually a large chunk of money – or you can make payments throughout the year. The due dates for the four equal payments are different depending on what kind of business you own. Here’s an article that will help you figure out those due dates.
This is one of the biggest lessons that I learned, the hard way at that, during my first year of business. Something that I wish I didn’t have to learn the hard way. Because paying the IRS almost $5,000 for one lump sum – HURT! But, if you only want to handle your yearly taxes, I recommend putting aside about 40% of your income every month to save up for that big payment. It might hurt right now, but you’re not only paying taxes you’re also paying your retirement too! So, don’t think you won't ever see that money again. You will, it’ll just take a couple (or more) years!
There you go! Those are the 5 steps to handle your business finances like a CEO. Be sure to know your break even point, don’t be scared to invest back into your business, use professional software that keeps track of your finances, develop that routine, PLEASE don’t forget about taxes like I did. That will save you a lot of heartbreak in the end.
How do you handle your business finances like a CEO? Shout it out in the comments below!