6 Personal Money Management Tips for Small Business Owners

As a small business owner, you know that managing your expenses is essential. Check out these six personal money management tips that you can put into action today.

As a small business owner, you know that managing your expenses is essential – every dollar you save is one more you can put toward the bottom line. If you don’t treat your personal finances like a business too, though, you could bring a host of problems on yourself. Check out these six personal money management tips that small business owners can put into action today.

1. Budget Your Personal Finances
Set up an Excel spreadsheet or use a free online resource like Mint to create a budget. List out all your monthly expenses, weigh them against your income, and set about getting your spending under what you’re bringing in.

2. Eliminate Credit Card Debt
Long-term credit card debt is the nemesis of many budgets. Total up all your balances, achieve a budget surplus through your cuts, and pay them down until they’re gone for good. Whether it takes you three months or three years, making an impact and sticking to it means moving in a positive direction.

3. Take Advantage of Coupons and Deals
Use grocery coupons, both from the Sunday paper and mobile apps like Grocery Pal and Saving Star. Check out websites like SlickDeals and FatWallet for deals on general purchases. Just make sure you truly need an item before you pull the trigger. If it’s for a food product you don’t normally eat or an electronic upgrade you don’t need, keep your money in your wallet.

4. Shop Online
Many retailer websites offer better pricing than they do in-store, so go online before heading out. Sign up for email newsletter updates to keep abreast of offers and cross-check prices for any purchase you’re considering on eBay or Amazon.

5. Cut Back on Personal Purchases
Avoid that fancy dinner, skip the upgrades on your TV and mobile device, and spend your vacation time at home. Your current wardrobe ought to serve you perfectly well, too. Forget about keeping up with the Joneses and leave the plastic in your pocket.

6. Automate Retirement Savings
Even though you probably don’t have access to a 401k plan, that doesn’t mean you can’t automate contributions to your IRA. Have your bank direct a preset amount to your retirement accounts, preferably at the beginning of each month. By getting your savings out of the way first, you can spend with a lot more freedom.

If you saved $1,000 on a business expense you would likely put it toward whatever area of your venture needed the most help – marketing or staffing, for example. Take the same approach with your personal savings. Invest them in your emergency fund if you have less than six months’ worth of living expenses, or direct them to a college fund for the kids. If those are not issues, boost your retirement investments and you just might be able to hang it up early. Managing your personal finances as a small business owner is important, but capitalizing on the fruit of those efforts is even better.

What ways can you think of for small business owners to better manage their money?

Image via Flickr

3 Bookkeeping Mistakes to Avoid

Bookkeeping is a key component to any successful business, but it can be complex and time-consuming if you don’t have the necessary knowledge and experience. Mistakes with your books can also be expensive to fix. Read on for three bookkeeping mistakes you should take care to avoid in your small business, courtesy of our friends at Bench.

This guest post is brought to you by Bench, the online accountants that use your Shoeboxed receipts to build you tax-ready financial statements.

Bookkeeping is a key component to any successful business, but it can be complex and time-consuming if you don’t have the necessary knowledge and experience. Mistakes with your books can also be expensive to fix. Read on for three bookkeeping mistakes you should take care to avoid in your small business.

1. Mixing Business and Personal Finances

In the event of an audit, having business and personal expenses combined can be a very costly mistake. Under audit, the IRS may take a sample of a period of a few months to see the volume of personal expenses on your books. If they find many personal expenses, they’ll extrapolate that to the entire period and apply taxes for that amount. As you can imagine, this is an expensive consequence of not separating accounts. If you have an LLC or corporation, you have even more reason to be vigilant about separating expenses – in fact, you’re legally required to do so. Failure to comply could result in a lifting, or piercing of the corporate veil, which opens you up to unlimited personal liability.

2. Doing it Yourself for Too Long

While a DIY approach is good in the beginning when the books are simple, as your business grows you’ll need to decide on a more robust system. To determine when the time is right to hire a professional, calculate your hourly wage and multiply it by the number of hours you spend bookkeeping – hours that could be spent improving your business in other ways. When the cost to do it yourself matches or exceeds the price of outsourcing it, you may want to look at your options. And remember, many professional services expenses can be deducted!

3. Trashing Receipts

Part of tracking expenses is maintaining records that prove the legitimacy of those costs. While the IRS doesn’t require receipts for expenses under $75 (provided you can show a bank statement), they can still be helpful to have for bookkeeping purposes. Not to mention, the more evidence you have, the better off you’ll be in the event of an audit. And in this day and age, keeping a thorough record of your expenses is no reason to clutter up your office; digitize your receipts with Shoeboxed or send them directly to your Bench bookkeeper. The following receipts are important to keep, so take extra care with them:

  • Meal and entertainment costs
  • Business travel costs
  • Mixed-use assets (for example, a vehicle used for personal and business, or the home office).
  • Client gifts

While it may be a pain point for your business, thorough bookkeeping is key to long-term success. Avoid these expensive mistakes by doing your research and bringing in help when you need it.

Top 7 Reasons to Keep a Separate Bank Account for Business Funds

You’ve probably heard that it’s important to keep your personal and business finances separate. Here are seven reasons why, courtesy of our friends at GoDaddy Online Bookkeeping.

This post is brought to you by GoDaddy Online Bookkeeping, the simplest way to manage your small business finances online. Sign up today for a less taxing tax time!

When you first started your business, especially if it began as a side gig, you probably just used your personal bank account to manage your income and expenses. Somewhere down the line, though, you have to make the choice to open a business account or stick with your personal account. We’re going to go out on a limb and say you should definitely keep your business and personal finances separate.

Why? Let’s take a look at 7 reasons why you want to consider it.

1. Deductions

Are taxes coming up and you want to reduce your tax obligations by claiming deductions? You can do that even if you use your personal bank account, sure, but it’s much easier to track your business expenses when they all come out of the same funding source. This prevents you from confusing the time you bought printer paper at your local big box store from all the other times you bought groceries there!

2. Taxes in General

Speaking of taxes, tax time is already a mess if you keep everything separate. When your personal and business finances are mixed, it’s going to be that much worse. Going through simple transactions becomes that much tougher, especially when the amount of income you deposited doesn’t add up to the amount of income on the 1099’s your clients sent you.

3. Professionalism

You’re trying to establish yourself as a real, professional business. The difference between a client or customer writing a check out to “Penny Smith” versus “Iowa’s Best Coffee” is huge. It sets a precedent for both the public and for you. Having a business account lets you maintain the level of professionalism you want.

4. “Hobby Business”

While the IRS generally doesn’t care if you consider your business a hobby or not (as long as you’re paying taxes on your income), they do care if you’re making deductions on something they don’t see as a “real” business. You must show a profit in three years out of five so you’re not considered a “hobby business.” It’s much easier to prove this 3 of 5 rule if you have a business account.

5. Mental Health

If you’re taking your business seriously, you want it to run as smoothly as possible. This includes your finances and maintaining a healthy growth pattern. When mixing your personal and business finances, you run the risk of getting an inaccurate view of your company. This can cause strain on not only the business but your mental health.

6. Reports

Growing your business also involves running reports to see where you truly stand. GoDadddy Online Bookkeeping automatically pulls in your business’s income and spending and creates reports like your “Profit & Loss or “Top Vendors.” Mixing business and personal income will confuse these reports and keep you from seeing a clear snapshot of your business’s financial health.

7. Incorporation

Thinking of incorporating your business? Then you’re going to have to keep personal and business finances separate. No matter if it’s a corporation, a partnership or incorporated sole proprietorship, the IRS will require you to separate the two worlds. If this is ever going to be something you do in the future, you might as well start it now. It will help ease the process going forward and prevent any big issues that might pop up during the transition.

Do you keep your business and personal finances separate? What are your tips to maintaining the separation?