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Whether your fledgling business is up and running or it is still in the ideas stage, one of the first things you need to organize is the company finances. The finances form the foundation of the business, something you need to get right if you want to establish a strong business that grows.
It seems simple, but one of the first things you need is a business bank account that’s completely separate from a personal bank account. Even if you’re a sole proprietor, it can influence your books, taxes, business model, and investment possibilities. So start simple.
When you mix your personal and business finances, it makes it harder to organize your end-of-year taxes; it also makes it harder for the tax office to understand your business. If you want to create a valuation for your business, a separate bank account makes it more accurate.
Taxes are another fundamental area of business banking; you want to get this right to avoid any liability and avoid tax overpayments. Whether you work with an accountant or not, you first have to calculate your revenue for the month. That’s your taking minus your expenses and interest.
Once you have this amount, you can add your tax rate – usually 25-30% – and move a portion of your revenue into a separate account to cover various taxes. Depending on your country or state, you will have to pay income tax, state tax, self-employment tax, and business taxes.
Talk to most financial advisors, and they will recommend that a new business takes out one or two lines of credit even if they don’t need them right away. Credit lines can help with cash flow, but they don’t have to be used, so it makes sense to open them initially to support the business.
However, there are many types of credit cards available, and you might find that a cashback credit card is profitable for your business. If you have regular expenses that you can use a credit card for, why not take advantage of a cashback percentage of between 3-5% to boost profits.
The revenue of your new business is the money you make minus your expenses and your taxes, but that doesn’t mean you should overspend on your infrastructure simply because it can be deducted from your taxes at the end of the year. It’s still better to look for value for money.
Let’s say you operate a business that uses transport such as cars, vans, or trucks; you need excellent liability insurance to cover any third-party accidents that happen in the course of the business day. If you can get high-quality insurance at reasonable rates, it improves revenue.
Every business needs a filing system; this is necessary for the organizing of the business in general and for tax or legal purposes. These days, most businesses use secure digital platforms for filing, but you can also use traditional paper files if that suits better. Both have pros and cons.