How To Handle Small Business Money?

You're reading How To Handle Small Business Money?, posted on Wednesday, January 19th, 2011 at 5:40 am in Economy, on BrainBloggers at the The Business World blog. More after the jump.

After the initial success, sooner or later most small businesses face the same problem. They have no idea as to how to manage the finances. Just like in personal finances, small business money does not and should not have the one size fits all policy. However, there are some steps that one can follow. These steps can be used by everybody including, freelancers, sole propreitors, small businesses and contractors. For more exclusive requirements one can consult a tax professional or a financial advisor. Some of the steps are listed as below:

Separating personal and business accounts- Just as one should not mix up their business and personal lives, similarly one should not mix up one’s business and private financial accounts. This method usually offers protection and makes it easier for the person to sell. It is not a mandatory step, but it is a sound method. Of course, separating accounts also depends on the size of the business. If the venture is something such as hobby income like part time web designs or arts and crafts, there is seldom a need for separation. But do remember to keep them lucid for tax purposes.

Decide on the structure of the business- After a moderate success as a small sized company it can be incorporated as a Limited Liability Company. By doing this, it helps to create a clear cut legal entity which is benefecial for the business. Some financial institutions allow owners to open business account as sole propreitors, but may have the business formed as either LLC or soe other business legal entity. Consulting with a business lawyer is helpful.

Employer Identification Number- It is basically a tax number for one’s business, which is similar to one’s Social Security Number while dealing with income tax. A specific tax number is required when checking accounts and operating business savings, separating income taxes for taxation policies. This number helps one to avoid identity theft. Obtaining it is free and easy from the Internal Revenue Service.

Open Business Related Credit Cards- People usually have a debit card for additional expenses, but there are business cards too to look after expenses. There are numerous advantages of business cards such as lower liability, cash rewards, better protections and so on.

Checking Accounts and Business Savings- Opening business checking accounts with a nearby branch of one’s bank can help one deposit checks and keep the small business money safe and free of confusion. The accounts set up in these banks is to take into consideration as to how one wishes to receive payments, receive money, to produce invoices and so on. There are various services provided with banks that are powerful tools for owners and is adjustable as per requirement.

Accounting Softwares- There are various ways of keeping an account of small business money apart from the trusted manual version. There are many softwares available that make accounting easy and effective!  Softwares such as Open Office Calculator or Microsoft Excel are very helpful!

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