One of the first steps in creating a small business is to understand your finances. Although this may seem to be a bit obvious, it is one of the most important tasks for keeping your business afloat. The first step, which can get easily blurred as an entrepreneur, is the separation of personal and business funds. Not only will it offer you personal financial protection, but also simplicity when doing annual taxes. This division will also make it far easier to sell your business if you ever decide to do so. Beyond division of your finances, it is essential to keep accurate financial records. This will simplify your accounting ten-fold and save you a lot of time in the future, as well as save you from dealing with the IRS later.
To further ensure that you do not blur the line of your personal and business finances, you may also want to consider getting an Employer Identification Number or an EIN. An EIN is a specific tax number for your business, which can make the process of opening bank accounts easier.
When you do open separate checking and saving accounts for your business, choosing the right bank is important. Convenience is of course a priority. Since you are a small business transactions as well as in-person trips to the bank need to be able to be made with ease. This usually means that having an account with a local bank makes the most sense.
You also need to take into account how you would like to do your banking. It is essential that your bank fit all of your individual needs. Local banks however often do not offer high interest savings accounts, which will become more and more invaluable as your business becomes more and more successful. If this is the case you may want to consider having your savings account with a larger bank and you checking with a local one.
As it is essential to have great document management to save you time, resources and money, having software that helps organize your finances can be just as beneficial. Again, it is important here to find the right software for you; otherwise it can lead to a lot of wasted time and energy. Make sure that the software makes sense to you and your employees. It should fit your needs when it comes to various aspects such as being capable of handling your sent and received payments, invoices, web transactions, Paypal, etc. Of course every business is different and there is no tried and true model that fits everyone. But if you know what your needs are and take the time to figure out who or what is able to best suit you and your small business, you will surely to start off on the right financial foot.