Competing with a business on the web is hard enough. Then, there are issues of money and cash flow. However, with some pretty easy changes, you can manage online finances like a pro. From tracking income and expenditure to registration and tax, here are some suggestions.
Invest in Necessary Tools and Services
There are always tools and external services a business needs. Most are designed to make things easier, and some offer an expert touch to enhance your business. For example, it helps to look into the best payment processing solutions for your business type. However, even something as trivial as cloud computing comes with numerous benefits. All tools and services should streamline business processes, enhance productivity, and potentially enhance cash flow.
Track Income and Expenditure
Regarding cash flow, one of the easiest ways to manage this is with income and expenditure tracking. There are various tools you can use for this, including spreadsheets, specialized apps, and even good old pen and paper. Whichever is best for your business, ensure all records are kept and stored safely. For local computer documents, it will help to limit user access. This also applies to logins to online tools. Paper documents are best kept in lockable folder cabinets.
Divide Online Business Finances
Managing business finances isn’t easy, and it can be challenging to even know where to allocate money. Up to 80% of small business owners struggle with cash flow management. While you can thrive on a tight budget, an SMB earning less than 250K can consider these:
- Allocate 50% of incoming funds for owner’s compensation insurance.
- Set aside enough taxes from income each month, usually 15% to 20%.
- Allow 30% of incoming funds to be set aside for business expenses.
- Take the remaining 5% of the profit to be allocated as a personal salary.
Tax Numbers and Business Registration
One of the first steps to creating a business is registering and obtaining a tax number. There are various legal and financial reasons for doing so. Registering a business also makes it official, and you can then appear in local directories. It’s usually pretty easy to do this, and all it takes is a quick visit to your country’s official website. Of course, a tax number (EIN in the US or UTR in the UK) also helps you avoid potentially costly fines and legal trouble because of non-payment.
Open a Business Bank Account
There is also another good reason to register a business and obtain a tax number. Without these, it is almost impossible to open a business bank account. A business bank account is essential for managing company income and expenditure. It helps keep personal and company money separate, which on its own is a massive advantage. However, a business bank account also allows you to access advantageous financing products and build a solid credit score.
Summary
Investment in the tools and services you need for operations is a solid method of managing online business finances. You can also save yourself from financial headaches by dividing funds for various operations, but this relies on a business bank account for transaction management.
Tags: Business Finances
