Beginner Finance Tips for Small Business

You opened a small biz to build a dream; not budgets and balance sheets. Don’t worry, it’s not just you. Loads of small business owners struggle to figure out their finances or do payroll taxes properly. 

Luckily, we’re here to help. We’ve got you covered with seven simple finance tips for small businesses and zero judgment—because it’s not always possible to be a visionary and great with numbers. Settle in, we’re here to help.

Small business finance tip #1: Know your budgeting basics

Sometimes just thinking about your finances can feel overwhelming, so let’s start from square one.

What’s a budget? 

A budget is a plan that lays out how much money you can spend on a monthly basis so you (hopefully) have money left over. 

A well thought-out budget shows you:

  • How much money you make
  • How much money you spend
  • How and where you spend your money

A budget helps you break down:

  • Where you must spend money
  • Where you can spend less money
  • Where you should spend more money

Why you need a small business budget

All businesses—whether big or small, new or established—need a budget. An effective budget helps you track your spending, understand your business needs, make smart financial decisions, and create plans to reach your goals. 

Homebase can help with your budget by giving you a clear overview of your labor costs and sales. You can use the data to adapt your budget as your business changes and even forecast future expenses. 

Small business finance tip #2: Start tracking your cash flow

Cash flow is the amount of money coming in and going out of your business; your cash flow tells you if your business is financially healthy.  Tracking your cash flow can be as simple as subtracting your expenses from your income and noting when you receive and pay bills, but you also need to look at when you receive your income to ensure you’re not spending money before you’re making it on a regular basis.

Tracking your cash flow makes it easier to stick to your budget, but more importantly, it helps you plan ahead. By looking at past cash flows, you can start estimating future ones and figure out how much money you’ll need to cover your expenses. 

Quick tip: Point of sale (POS) records are a great place to start analyzing your cash flow. Good POS systems track sales, labor costs, inventory costs, supplier purchases, returns, and more, so you can easily calculate what’s coming in and what’s going out. 

A platform like Homebase lets you track and plan in one place. Get an overview of your cash flow with reports like hours vs. sales, hourly labor costs, labor costs summaries, and more. Homebase also syncs with a number of POS systems so you can import your sales and labor data and forecast costs with ease. 

Small business finance tip #3: Choose a great accounting tool

Still planning your budget in Excel? Do yourself a favor and start looking at accounting software. A good accounting program is one of the best investments you can make for your business.

If you’re just starting out, accounting software has features that help with budget building, tracking, and planning. As your business grows, automation will save you from hours of tedious data entry and reduce the chances of expensive mistakes.   

Accounting software also keeps everything safely in one place; no combing through spreadsheets or hunting down receipts to get a complete picture of your finances. 

 Look for an accounting program with the following features:

  • Invoicing and billing
  • Expense tracking
  • Bank reconciliation
  • Reporting
  • Tax compliance

The best accounting software integrates with other business tools so there’s no need to manually input timesheets, payroll and other financial information. Homebase integrates with Quickbooks to automatically push payroll and employee hours directly to your Quickbooks account. 

Small business finance tip #4: Divide your personal and business accounts

No matter what stage your business is at, separating your business and personal finances is a must. Why? For a few different reasons:

Clarity: By maintaining a separate bank account, credit card, and/or line of credit for your business you have a crystal-clear record of your cash flow. This means you can budget and plan without confusing your transactions.

Tax benefits: You can’t claim personal expenses as business expenses, or you’ll find yourself in hot water with the IRS. With one account for everything, you’ll just spend hours separating expenses at tax time and you’re more likely to make reporting errors. 

On the flip side, if you mistake a business expense for a personal one, you lose out on potential tax benefits and deductions. 

Protect your personal assets: Without separate accounts, your personal assets aren’t safe in the event of legal issues or bankruptcy. A dedicated business account protects personal savings, investments, or property if your business doesn’t make it.

Financing: Considering a business loan? A combined personal-business account makes it hard for lenders to get an accurate read on your business finances, making a loan less likely.

Small business finance tip #5: Don’t forget about taxes

On average, small businesses pay 19.8% each year in taxes. This is your friendly reminder to include taxes in your budget and start setting aside money to pay them.

Small businesses typically pay:

  1. Income tax: You have to pay tax on your reported business income. The rate varies by region and depends on how much money your business makes.
  2. Payroll tax: If you have employees, you’re responsible for deducting the correct amount of taxes from their wages and depositing the payments. Employers must pay a portion of social security taxes, Medicare taxes, and unemployment taxes for each of their employees.
  3. Self-employment tax: Since you’re both an employee and an employer, you need to pay social security, Medicare, and unemployment taxes just like your other team members. 
  4. Property tax: If your business owns land or buildings, you’ll need to pay property taxes each year.

To make sure there’s money left over for taxes, take out a lump sum at the beginning of the year, or put away a smaller amount each month. In most cases you’ll have the option to make monthly installments, which can make things easier on your cash flow.

Small business finance tip #6: Make payroll painless

Payroll is the process of paying your employees, but it’s easier said than done. Payroll for small business involves a number of steps, including:

  • Tracking hours worked
  • Accounting for breaks, sick days, PTO, overtime, and long-term leave 
  • Calculating employees’ pay, including taxes
  • Sending out wages via direct deposit or by check
  • Staying on top of compliance requirements

Getting payroll right is critical for your employees’ sense of security, their engagement, and productivity. For example, would you want to work for someone who never paid you on time? It also saves you from nasty surprises at the end of the year (like a six-figure tax bill).

Lucky for small business owners, Homebase turns payroll into just a few clicks. Instantly convert timesheets into hours and wages, calculate everything, and then send the correct payments to employees, the state, and the IRS. Homebase is the best payroll for small business, saving you time and the stress of staying compliant—no financial professional or outsourcing required. 

Small business finance tip #7: When all else fails, speak to an expert

If you’re still not feeling confident, that’s okay. Business owners wear a lot of hats, but it’s not possible to be great at everything. If finances don’t come easily, just call an expert. The following professionals are a fantastic resource if you’re in over your head:

Bookkeepers: These wonderful humans manage things like recording your expenses, income, and transactions, and reconciling your accounts every month. If you’re struggling with day-to-day finances, a bookkeeper is your best bet. And you don’t need to employ one full time, most small businesses work with bookkeepers on a freelance basis.  

Accountants: While bookkeepers focus on daily financial responsibilities, accountants offer higher-level financial advice and tax guidance. If you have a handle on the basics but need support planning, an accountant might be right for you. 

Financial planners: These pros can be really helpful when you’re just starting out, if you need to restructure, or you’re moving to the next level. They’ll work closely with you to understand your business, its unique challenges and opportunities, and find custom solutions. Many banks offer free financial planning services for their clients. 

There’s lots of free help out there, too! Homebase Support has detailed how-tos and answers to cashout, payroll, tax, and other financial questions. Plus, they’re available Monday to Friday if you want help from a human.

Finances are tough, but we have your back. Take the stress out of running a small business and the pain out of payroll with Homebase. Get started

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