Managing finances is an integral part of any business and the biggest challenge. Along with innovating products and managing teams, you must have a good knowledge of finance management.
Poor finance literacy and management are the reasons why most businesses fail. On the positive side, business incorporation provides many additional financial options. Finance management is essential for the business owner for growth and development. To avoid failure, it is critical to create financial stability.
If you are a newly incorporated business, it is essential to get through with the U.S Employment laws to understand and create workplace regulations. Consult an attorney from Incdecentral to get the required help in navigating through the laws and get a better understanding.
We have the top five tips for financial management that will help you in growing your business and assuming responsibility for financial wellbeing.
Read below and get your doubts cleared!
Disparate Personal and Business Bank Accounts
The biggest advantage of business incorporation is that the separation of personal and business expenses and banking accounts becomes easier.
You might think it’s easier to maintain just one account for both personal and business assets but if you do not separate the expenses they might merge and will eventually make it difficult to keep track. Another advantage is that it adds credibility to customers.
Incorporating your business will give you access to business bank or cash accounts in FDIC-approved ‘bank alternatives’. Following are some of the advantages of using a separate business bank account:
- You can use this to send, place or track money.
- A separate bank account will help you in stress-free tax transactions.
- Straighten out bookkeeping that will help during the audit.
- Simplifies the process for business loans.
Maintaining a separate business account builds a more attractive business for investors and lenders as they can easily analyze the lawfulness and risks of the business.
The lenders conduct an assiduity when you apply for a business loan or SBA loan to test your bookkeeping and analyze risks. Having a dedicated business account simplifies the whole process.
Business owners who do not have a separate account, go through a lot of trouble during loan approval as they are considered a riskier option by the lenders and investors.
Responsible Use of Business Credit Card
It is essential to have a separate business cash account because it is responsible for building a credit score.
It also helps when you need investments or business loans and provides extra float. A strong credit score is an essential factor when you need money for your business.
Leasing out money for businesses is risky for lenders and therefore they consider the Business credit score to determine the qualification for a loan. To build a strong credit score, you must use your credit card responsibly.
Settle debt funding as soon as possible and do not run your balance for more than a few days.
With the arrival of FDIC-insured business accounts, it has become easier for businesses to apply for a credit card without a ‘personal guarantee’. It provides more secure credit cards for business incorporations.
Credit cards have become a simpler alternative to loans as you do not need any personal guarantee. You can use it to acquire the equipment and inventory for the business.
Appoint an Accountant
It is advisable to appoint a CPA (Certified Public Accountant) to get help managing the finances as it can get a little overwhelming at times. Managing investments, tax laws, insurance, etc. can be challenging.
Apart from taxes, a CPA can help you with many things like helping you understand finance better and avoid mistakes that can cause monetary damages. Following are the advantages of hiring a CPA:
- Take the edge off minor business costs.
- Scrupulous and comprehensive bookkeeping.
- Supervising business assets and performance.
- Providing the right financial management advice.
- Helping with getting maximum tax returns by filing taxes.
- Helping with critical business decisions.
- Help in maximizing tax deductions.
Having an accountant on a full-time basis will help with many things apart from taxes as a CPA can help alleviate filing issues with the IRS before time.
It is better to have a CPA all year round and not just during the tax season as this will help in book reconciliation and avoid costs of remedying mistakes. Consult our attorneys at Incdecentral to get help in setting up and managing your business.
Business Tax Regulations and Prospective Benefits
It is important to study tax regulations to avoid any unexpected taxes. The kind of tax form depends on the type of your business entity. You’ll need to learn about the tax forms and how to pay them. Following are the five types of business taxes:
- Employment taxes
- Estimated taxes
- Excise tax
- Income tax
- Self-employment tax
The tax income is determined by the businesses based on the last 12-month income or tax year. Following are the two types of tax year options:
- A traditional year – 1st Jan to 31st Dec
- A fiscal year – 12 months in a row finishing on the last of any month excluding December.
You can also spread out your tax payments by doing them every month instead of doing them every quarter.
Automate Business Accounting
Use your time efficiently on more significant business decisions for business growth. Time is money therefore automating your business will make your life easier by saving a lot of time. Following are the advantages of automating the business:
- Better financial overview.
- Strengthen employee compliance.
- Improve business productivity.
- Improve expense compensation.
- Streamlines business procedure.
At Incdecentral, we can help you in establishing the business along with the necessary paperwork for obtaining your EIN, Registered Agent services, and corporate documents needed to open a bank account and hire employees.
We send your articles of incorporation and other documents encompassed in your plan once the business confirmation is received. This can take a few days to several weeks depending on the state of business filing and their backlog.
Notice: The details provided do not constitute legal advice. The knowledge of this article is for general reference purposes only. Your access to or reliance upon this piece of information does not create any relationship involving an attorney or client. You should always head out and consult an attorney for specific legal advice regarding your situation.