Strong financial habits are the backbone of any successful small business. Thankfully, in today’s world, we can identify these habits using concrete data, and, so far, the data has shown that small business owners who employ these best practices consistently outperform those who do not. In this article, you’ll learn about five financial habits successful small business owners tend to have in common.
- They have the right business structure
Small business owners and freelancers may start off as sole proprietors, and as they get the ball rolling and grow the business beyond themselves, they are met with new challenges. The first challenge is choosing the proper legal structure for the company, with each structure having its own requirements, both in terms of legalities and taxation.
If you are based in the US, the best way to study these structures is by visiting the Small Business Administration at www.SBA.gov, where you will find summaries for each kind of business structure. Once the right structure is in place, you will have the foundation for your finances, and you will be able to take advantage of the tax benefits and deductions that come along with it. However, if you end up choosing the wrong structure, you will likely face expenses that can hurt your bottom line.
- They take full advantage of deductions
Deductions are great when it comes to reducing your taxable income. If you want to take full advantage of them, make sure that your accountant knows which of your expenses qualify for tax deductions, and that he or she diligently writes them off. Deductions are the biggest advantage of incorporating your business, so taking these deductions is not “cheating the system.” They are in place to help your business grow. Failing to take deductions to which you are entitled is cheating your business.
- They have standardized processes
Standardized processes are a godsend when it comes to efficiency and scalability. Like most operations in your business, you want to have a financial process that is standardized and scalable, so that it can be implemented across multiple teams as your business grows. A good solution here would be a cloud accounting application that offers features such as online invoices and expense management.
- They keep debt to a minimum
Venture and angel funding are rarely a financing option for most businesses. Instead, some business owners turn to small business loans or business credit cards when they need an influx of cash. This resultant debt, which, if unplanned for, can really weigh a business down with interest payments. Most successful small business owners have plans for paying off debt even before they actually borrow the money. This helps create great financial forecasts and avoid any potential bumps in the road.
- They regularly review their finances
Finally, this habit brings it all together. By going through a regular financial review, whether it is weekly or monthly, you are able to notice the rhythmical pattern of income and expenses, and make incremental improvements. It will also give you a better understanding of how the business operates.
For more information about successful financial habits, or to sign up for a merchant account, please call (888) 924-2743 or go to Charge.com.