Create a Realistic Budget
Budgets are extremely valuable! To start, establish a fiscal year for your business (i.e.; April 2019 till March 2020). Determine your assets (things or money you have) and anticipated expenses for the upcoming fiscal year based on past expenses and spending. It is also best to overestimate when trying to determine how much you’ll be spending on things like supplies. This can provide extra room for your business financially during the year.
Find a budget template under MAGS resources.
Pay Your Taxes
As an entrepreneur, paying taxes generally goes one of two way: you either over pay, or don’t pay enough and end up in trouble with CRA or the IRS. The amount you will owe will vary on the type of business you run and what your expenses are.
If you aren’t paying out your taxes quarterly (particularly sole proprietors) I would recommend saving 20-30% to ensure you’ll have some financial cushion to fall back on come tax season.
It is also extremely important to note that taxes are complicated. If you can afford to, get an accountant or tax specialist to help you.
Pay Off Your Debts
This tip goes for both your business and personal expenses. Get rid of debt! Many entrepreneurs need to secure external funds to start up their businesses or begin entrepreneurship with their own debts (i.e.; small business loans, student loans). It is imperative that you frequently (and aggressively) pay off these debts to ensure financial freedom for both you and your business in the future. Make set payments every month to help decrease these debts. Re-evaluate your spending to see what luxuries you can afford to live without and spending some of that money on repaying debts.
Employees may play a big role in the success and failures of a business, but they are expensive. Having employees means you must commit financial resources to hourly wages, salaries, benefits, training and training materials. Consider outsourcing work to freelancers who simply require a set fee for their services.
Open Up A Business Account
This is typically a no-brainer for entrepreneurs in partnerships or corporations, but sole proprietors tend to disregard the importance of having a separate business account. Separating the money you make in your business from your other income is essential. It allows you to determine how much money your business actually has. It also reduces the possibility of you spending business funds on personal projects or vice versa. Business accounts keep you accountable!
Philanthropy is something we’ve discussed on the blog in the past. Businesses and entrepreneurs that make donations to non-profit organizations get to write them off come tax time. That means your donations will be used as a dedication on your taxes, reducing the amount you may owe the government.
Get an Accountant or Bookkeeper.
We know this isn’t feasible for everyone but acquiring the services of actual professionals is extremely beneficial. They can help you keep track of expenses, provide sound financial advice and help you save money.
Interested in learning more about entrepreneurship and money? Check out our podcast episode, Mo Money, featuring Kwami Boafo, Commercial Relationships Manager at Scotiabank.