“Failing to plan is planning to fail.”
Chances are you have come across this famous quote by Benjamin Franklin. The statement holds in many areas of our lives, and most importantly, in commerce.
Proper financial planning is one of the moving parts of your venture’s longevity. It serves as a roadmap on how entrepreneurs can manage the company’s cash flow, guiding their everyday commercial processes.
This article focuses on seven financial tips for business owners that set up a company for prosperity. However, before we get into the specifics, let’s first define financial planning.
What is financial planning?
Financial planning is a comprehensive approach to managing finances. It involves creating a plan on how a business can reach its financial goals. Additionally, it provides small business owners with a foolproof financial management strategy that allows them to make better decisions on resource allocation.
Financial planning goes beyond finance basics. You need to know about the company’s assets, liabilities, investments, and many other business aspects. And as much as you can create a financial plan yourself, such complexities signal the need for a financial planner expert in Portland, Oregon, who will assess the company’s income, expenses, and assets, making recommendations on how to achieve the set goals.
Why is it important to do financial planning for a business owner?
Small business financial planning is not just about making sure you have enough money in the bank—it’s also about making sure that you are prepared for the future and can afford to weather any financial storms that may come your way.
Since a small business finance plan sets the path for proper money management, it helps you generate more savings and investments. Even with debt obligations, you will be able to sustain quality living standards. Additionally, you will have peace of mind knowing you have the financial muscle to cater to emergencies and other unprecedented life events.
Last but not least, business owners who don’t create a financial plan can lose track of their finances, leading to the company’s downfall.
7 financial planning tips for small business owners
If you’re a small business owner, here are some financial planning tips that you should consider:
Get paid first
Expenses never end, but investing is the only way to ensure you build wealth over time. Start by saving at least 10 percent of your income—or whatever amount feels comfortable—and increase it over time as your business grows and becomes more profitable.
Know your after-tax income
As a small business owner, you must know your after-tax income to ensure you pay taxes on time. Doing so allows your business to avoid huge penalties and interest charges. Outsourcing this part of your operations to financial experts is an excellent option that will not only save you time but also allow you to explore loopholes that will reduce your tax liability.
Keep track of your expenses
Keeping receipts makes it much easier to keep track of your expenses. It minimizes the probability of fraud, for instance, when someone charges something on your account without your knowledge.
Prioritize paying off debt
Paying off debt should be a top priority for small business owners. Delayed or missed client or supplier payments will hurt partner relationships, which is detrimental to everyday business operations.
Think about your retirement
When it comes to financial management for small business, retirement planning should be included.
Retirement planning ensures you have enough money to cover your expenses, personal needs, and emergencies when you are done with work-life. As such, it’s an excellent idea to generously contribute to a Roth IRA that offers tax savings now and tax-free withdrawals when you retire.
Keep personal & business finances separate
While it’s tempting to combine your personal and business finances, keeping them separate is the best way to avoid tax problems down the road. This means paying yourself a salary similar to what you would earn at another job and making sure all company expenses are paid directly by your company under expenditures.
Hire a financial advisor
Financial advisors will keep you on track with your short and long-term goals, giving you invaluable advice on maintaining proper financial health. They’ll also provide investment management tips, help you prepare for retirement, and advise you on how to grow your brand.
Financial planning for business owners is about more than just making money. It’s about protecting your business and making sure you can continue operating and build a successful brand that will last a lifetime.
To learn more about how financial planning for a small business can help your company achieve its goals, contact Interactive Wealth Advisors today.