There’s so much to do when starting a new business and it can get overwhelming fast. Let’s focus on three important things you should do right now before business picks up.
Already in business? No problem. These can be implemented at any time, it’s just best to get them out of the way first if you can.
1. Open a separate business bank account
It’s super easy to make business purchases out of your personal account and toss the receipt in your purse, but I promise you’ll thank yourself at tax time if you get rid of this bad habit. If you’re a sole proprietor (the default business structure), you can go to your bank and set up another personal bank account using your social security number.
If you’re any other form of business, be sure to take your business formation documents, federal ID number, and anything else your bank may require. Call the bank or check their website for a list of information you’ll need so you don’t have to make multiple trips. Once you have this account set up, only use it for business. Need help finding a new bank? Here is a list of the best banks for small business.
2. Decide on a bookkeeping tool
There are a bunch of bookkeeping software options available, but my top four faves are Quickbooks Online, FreshBooks, Xero, and Wave. With these cloud softwares you can automatically import and categorize your transactions which is a huge time saver when compared to manual entry in a spreadsheet. Once the transactions have imported into whatever system you choose, assign them each an income or expense category. Then you’ll need to do a reconciliation (which is like balancing your checkbook).
If the learning curve of a new bookkeeping software is too much, there’s nothing wrong with using a spreadsheet to organize your financial information. The key is to choose something you’ll do on a consistent basis so you don’t have to add everything up at the end of the year.
3. Research your sales tax obligation
As states try to round up funds, they’re turning their attention to sales tax as the solution. Many states are now requiring sales tax on select services in addition to tangible products, which in past years, had no sales tax requirement. Before you send your first invoice, get clear on whether or not your state wants you to collect sales tax on your products and services. This will save you an awkward conversation with a client later on if you need to add the sales tax and may also save you from paying out-of-pocket for the sales tax.
If you can’t find the answer to whether or not your product/service is taxable, you’ll probably save time by giving your accountant or the state department of revenue a call. The best time to make this call is early in the week and early in the day. Because let’s get real: no one answering phones is going to be super excited to get you info on a Friday afternoon!
If you’re looking for a little kickstart to get your finances in order, I’d love for you to join me and my small business friends over at Know Your Worth®.
The Know Your Worth® program includes access to a Certified Public Accountant and a membership site which includes short videos and beautiful, downloadable guides that will walk you through the main topics in each lesson. Each lesson will be released on a weekly basis to ensure that you don’t get overloaded with information, and you have time to review and ask questions before proceeding. We have a private Facebook group for check-ins, questions, and accountability!
Take care of business by finding out whether or not you should be collecting sales tax (even on services!) – Tweet me!
Getting these three things crossed off your checklist will reduce your stress and set your business up with a good foundation.