Being a business owner isn’t always synonymous with being a business finance guru. It is fairly common for someone to start a business because they see a gap in the market or have a passion in a certain area but have zero financial expertise. For example, you love vintage clothes, so you start your own shop. You are a social media guru, so you take on some small business retainers. To help you solve some of those pesky accounting issues, we have put together the top five frequently asked business finance questions.
How much Money does it Take to Start a Business?
One of the most common business finance questions asked is, “how much money will it take to start my business?” This is a critical question because running out of cash is the leading cause of small businesses failure. The tricky part is, the answer varies significantly from business to business.
When you are starting out, you should sit down and determine your up-front, one-off set-up costs. Then, try to calculate a monthly base cost for all the expenses you’ll need to keep the business going. This will include everything from your office or shop rental costs, basic supplies, insurance, office furniture, web hosting, and your phone and computer. You can then calculate how much money you need to make to cover these running costs.
What Funding or Support is Available?
Given the tough economic times of 2020 and 2021, several government support packages are in place for different business sizes and industries. The criteria for these support packages will vary depending on where your business is located and how your business revenue has been impacted.
What is the Best Way to Track My Small Business Spending?
If you are currently stuffing all of your business receipts in a shoebox and hoping your accountant will sort it out when tax time rolls around, it’s time to upgrade your system. Some top tips for tracking your business spending:
- Open financial accounts specifically for your business
- File your receipts in folders
- Take photos of all receipts so you have digital copies on hand
- Keep a spreadsheet
As you get more sophisticated, it is a good idea to invest in cloud-based accounting software.
How Much Tax do I have to Pay?
All business owners are eligible to pay local, state, and federal taxes. The rate that you pay is determined by your business’s structure (i.e., whether you are a sole proprietor, a corporation, a partnership, or a limited liability company). There is a different income tax return to be completed for each of these business structures. Check with your accountant or financial advisor if you are unsure.
What is the Biggest Overhead when Running a Company?
The largest expense for most businesses is their rent or lease fees, followed closely by labor costs. For this reason, many people start their business operating out of a home office, their garage, or by leasing virtual office space. A virtual office gives you an inner-city address, and most arrangements can include a professional receptionist who takes all your business calls. You also gain access to professional meeting rooms should you need to meet face-to-face – a rarity in this current climate.
Balancing the books and keeping your finances in order can be challenging for many businesses. Still, by doing your research, planning carefully, and implementing robust systems, you can stay on top of it and give yourself the maximum chance of success.