Making money and finding fulfillment is what most small business owners strive for when starting one. While those are valid factors to prioritize, there are also other important things that every small business owner should know. These include managing your cash flow and investing time and resources in quality tools and processes.
We will go over tips that you may want to start implementing to make running your business smoother. We primarily focus on small businesses that are run online or from home. That does not mean these tips will not apply to brick-and-mortar stores. So let’s get started!
Have A Separate Bank Account
Having a separate bank account for your business than the one you use for personal expenses is highly recommended. It will make your life so much easier. It can be tedious to go to each bank statement to figure out what was business and what was personal.
You will need to know your business expenses to see your full business’s financial health. Being able to access this information readily in one separate account will make it easier to do so.
In addition, there is an expense that not a single business in the US can avoid: taxes. You may want to claim business-related expense tax deductions. Having a separate bank account for your business will save you time and an accounting headache comes tax season.
Don’t Procrastinate Bookkeeping
Speaking of accounting, let’s face it, not many people like to deal with it. However, it is crucial to be on top of your business income and expenses to make sure that you have a full picture of your business. Especially when it comes to filing your taxes correctly for the year as we mentioned earlier. Even if you’re using a CPA to file your taxes for you, they will still need to know expenses and income.
Depending on the size of your small business and the platform(s) you’re selling on, bookkeeping can be simple with the right tools. If you’re selling hand-made items exclusively on Etsy or your own website, for example, a simple Excel spreadsheet may do.
If you have a reselling business and you’re selling on multiple marketplaces like eBay, Amazon, and Facebook marketplace, consider a bookkeeping software. Or if you have a lot of business expenses from different vendors, bookkeeping software will help you stay organized. We use GoDaddy for our bookkeeping and wish that we started much earlier.
Master Your Cash Flow
Along with taxes, knowing the health of your business means knowing your cash flow. Make sure you fully understand your profit margins for your products and services. While a certain number may look good on paper against what the inventory may cost, make sure you account for operating expenses like overhead and other business expenses to sell your products. Here are some things to look out for and helpful tools you should seriously consider.
Mind Your Inventory
If you are selling physical products, your inventory may be your biggest business expense. This is where you will need to spend time to assess your cash flow. Here, you may consider if selling items with higher quantities but lower profit margins is worth the time. Or if you should focus on high-cost items with lower quantities but a higher profit margin.
A higher cost of goods means that your money could be tied up longer. You may also need to consider storage and factor that in for costs if you choose to rent space. Whichever business model that you choose to adopt, it is important that you don’t corner yourself in a tight financial situation.
Have An Online Presence
Nowadays, selling online will net you a much larger customer base than you could ever reach in person. You can certainly use established platforms like eBay, Amazon, Etsy, or similar websites to sell your products.
Or you can build your own online store how you want with all the e-commerce features you will need with a hosted solution like Shopify. Shopify is a top-rated e-commerce website builder with powerful and proven tools to build your own online store without needing a developer.
They have multiple plans to choose from so if you rather sell on a Facebook page, they have that option too. They provide a payment processor, inventory tracking, staff accounts, and 24/7 support.
Master Your Shipping
Having to ship a product to customers means mastering shipping is an absolute must. Shipping costs can easily eat up your profit margins if you’re not on top of it.
We write a lot about shipping here at the blog and how to save money doing so. The number one way to save money on shipping is by using shipping software. What is shipping software? Shipping software integrates with e-commerce platforms to give you a discounted shipping rate for your orders.
They are able to get commercial pricing on postage with major carriers depending on which shipping software that you use. You would normally need to ship thousands of packages per year to get commercial pricing with a particular carrier. However, shipping software makes it possible to get commercial pricing through them.
Shippo is one that we recommend because they offer multiple shipping carriers, including USPS, FedEx, UPS, DHL, and many more. A quick google search will tell you that they’re one of the best shipping software services out there. Shippo also integrates with Shopify and other major e-commerce platforms so you can find all your orders in one place.
Know Your Business Deductions
Business deductions are extremely helpful to know to run your business. You want to make sure that you are actually claiming legitimate business expenses that you can. Check with the most updated information from the IRS to ensure you’re complying with the law.
Disclaimer: We’re not CPAs or tax attorneys. We do not give tax or legal advice. Make sure to consult with a Certified Public Account for questions about tax laws and keep to date with the latest tax laws as set by the Internal Revenue Service. We run our own small business and we are sharing tools that have helped us track our business income and expenses.
Using Your Home
For many small and individual businesses that operate at home, meaning you do not rent a retail space, make sure you look to deduct these expenses. According to the IRS, these expenses may include mortgage interest, insurance, utilities, repairs, and depreciation. However, you must meet two basic requirements set by the IRS.
The first is that you are using your home on a regular basis and you use the space exclusively for business. The second is that it is the principal place of your business. Check here for specific details.
Mileage Tracker
If you need to drive quite a bit for your business, including trips to meet clients, sourcing inventory, shipping, or whatever it is that requires you to drive, you can deduct car expenses. If you use your car for both personal and business, make sure to divide expenses based on actual mileage.
This is where a mileage tracker is extremely useful. You may not remember to write down every time you start driving for business with a pen and paper. Or worse, lose it. However, you can download a mileage tracker to keep you organized. There are many apps available to choose from. The mileage tracker will record every trip that you make.
You will only have to classify if the trip is for personal or business. You can do this at the end of the day if you can remember to. Or, the easiest way to do this is by going into the app and classifying each trip every few days or every week.
Last Tips Every Small Business Owner Should Know
There are many amazing reasons to start and run your own small business. Knowing the tools and services available to you can make a huge difference when it comes to operating your business smoothly and efficiently. Business deductions help save you money but bringing in sales and revenue while saving money on expenses should be the most important goal.
Lastly, customer service will be a priority. No matter how small your business is now, customer service can make or break your small business.