How to Set Up Your Business Finances

It’s no secret that the majority of small business fail within the first five years of opening. And the reason for this is bad financial management.

Now that my small business is growing I’ve took some initiative to get my business finances in order. Here’s how I am ensuring that my business is set up for long term financial success.

# 1 – Create a Savings Buffer

Creating a savings buffer is my number one priority and should be yours as well. When you are starting a small business the income is just too unpredictable. Some month’s you’ll bring in a lot of money while other months you’ll struggle. You need to consistently save money during the months you have extra.

You need to have a cash buffer to get you through those tough months.

# 2 – Set Up Business Bank Accounts

Secondly, you need to have business bank accounts set up in order to keep your finances organized. You can set up a business checking account to keep your business money separate from your personal money. You may also need to save for taxes, you can set up a separate savings account to save for this.

By setting up individual accounts for your business you’ll be able to manage your money better. It’ll also be easier during income tax time since your finances are organized and you have money saved for taxes.

# 3 – Make a Plan

After a few months you should have a rough idea of what amount of money your business can bring in. From here you need to plan if you should do more marketing and work to increase your earning potential or if you’ll be able to make it on your current earnings.

You should also set up a business budget. You need to account for your salary and any related expenses in this budget.

Starting a small business is fun and very rewarding. However a lot of work is needed upfront to turn your business into a success. Since the failure rate of new businesses is high you need to make sure that your business finances are in order.