At this point you have successfully outlined your goals for your business as well as have an idea on how to find your client base. Now, it is time to focus on the financial aspect of your business and make sure you are set up for success. This will require figuring out how you want to operate your bookkeeping as well as setting up the bank accounts necessary. Take a look at this week’s series in order to gain more perspective on this important topic.
Why Is Having a Financial Plan Important?
When running your own business, you need to have a full understanding of where your money is coming and going. Neglecting this aspect of your business will only hurt you in the long run —effectively ending your business for good in most cases. Based off of your goals that you created from the last article, this is where you begin to plan out what your financial goal is.
How Do I Create A Budget?
To start your budget off, you first need to plan out what the costs of the business are going to be. If you are working from home, the costs will be much more minimal, but if you decide to work out of an office you will need to take into consideration costs such as rent, utilities, office equipment and more. Also, it is important to remember to include insurance for your company into your budget.
There are 2 different types of costs to consider when planning out your budget as well, which are fixed and variable costs. Fixed costs stay the same month to month such as rent, memberships and insurance. Year to year they may go up, but overall they stay the same throughout the year. Variable costs are going to change on a monthly basis, and are charges that are more sporadic such as transportation costs or taxes.
Calculating startup costs is also going to play a very important part in determining your budget. Below are both some mandatory costs as well as costs that could be additional depending on how you are going to shape your business.
- licenses and permits
- equipment & supplies
- employee salaries
- building rent/office space
Bank Accounts & Bookkeeping
Once you have your budget planned out, the next task to check off of your list would be to create a bank account as well as figure out how you will do your bookkeeping. With the proper software, bookkeeping can be a breeze once you get the hang of it, however some may prefer to keep this external and hire an accountant to do it.
Creating Bank Accounts
There are a few items that you want to keep in mind when creating a bank account, such as what bank you are going to use for your business, as well as what types of accounts that you need. Some companies have seperate accounts for income versus money that is going out for things such as payroll, vendors and taxes. This leads into determining how you are going to take payment from customers for your company. Do you want them to pay by check, card or online? Deciding this will determine if you will need a device that assists with card payments or if you will need to go so far as creating a website. One of the most important things you will need in order to open your bank accounts will be your company tax ID number, or your personal social security number.
Bookkeeping for you Business
When it comes to the bookkeeping aspect of your business, you need to figure out what method works best for you. There are many types of accounting software that you can utilize, but you need to find the one that is suitable for you and your company’s needs. By tracking the funds coming in and out, you can compare it with your bank statements and make sure that no unauthorized funds are leaving your bank account. For a more cost effective method, something as simple as an Excel spreadsheet would be suitable in tracking all of this for you. Make sure to keep records of all of your transactions and spending as it will become vital during tax season.
Lastly, now that you have learned how to create your financial plan, set up a budget, and keep track of your income and spending, you are nearly there! By making sure you have a clear financial record of your business, you will be able to determine how successful it is as well as what areas you need to work on.