The first rule of thumb for every business owner is to keep their personal and business accounts on parallel lanes, this is important so that the two accounts do not overlap. A savings account is advisable for your business because it helps you to build equity. Rock-solid business savings can help you reduce reliance on loans especially when the start-up cost has been reconciled. It enables you to build mid to long term savings to sustain the business and cater for future projects.
A major reason why a savings account is a must-have for every business is to hedge against any unforeseen circumstance or emergency. This account can be a lifesaver, especially when circumstances beyond our control unfold. It is logical to put away funds for at least six months peradventure there is a business downturn that might affects sales and profitability. An example is one of an entrepreneur who almost lost her bakery business, which she had been running for 7 years to a fire accident. But due to the savings she had accumulated over the years, the business recovered from the mishap and has further expanded to other parts of the country.
Besides having a savings account, a checking account is also important if you accept payments from your customers through checks, POS and ATMs. This account helps you to monitor transactions easily and set limits on daily spending. It also enables you to delegate financial tasks to some of your trusted employees, by giving them access to the account.
It is imperative to have a budget that helps you to track the costs and expenses of the business. Irrespective of the size of your business, never overlook budgeting and there are some tools online that can help you do this effectively including freshbook.com and outright.com. These online accounting tools enable you to track your expenses, sales, invoices, revenue in a simple and automated way. It also enables you to make accurate financial forecasts which also gives you a clear picture of the financial health of your business.
Reviewing your business structure is important to help you measure the growth and progress of the business. Despite the boom that some businesses have enjoyed over time, they are still yet to transition from sole proprietorship to a limited liability company. To boost the profitability of the business and manage your finance effectively, you can consider converting to limited liability entity. It will also enable full separation of your business and personal assets in case of a liability issue. This type of business structure affords you a certain level of protection of your personal assets and some tax advantages.
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