What Small Business Owners need to know about Money
You have your own business and you are good at what you do but you realize that somehow you are not doing the right thing with the money you earn from the business. You buy your supplies and pay for them. Your customers are paying, some slower than others and sometimes you are concerned about you meeting all your expenses. You are sure it has to do with your knowledge of money management.
I have some tips for you but first, there are a few questions you need to answer truthfully.
1: How often you go to the bank?
2: Do you get paid in cash from your customers?
3: Do you pay for you supplies in cash?
4: How do you pay yourself?
5: Do you have Petty Cash?
6: Collection of Government Taxes by the business, do you pay on time?
When ever you have sales for that day, you should go to the bank at the end of business that day. Yes there are charges for depositing into a business account but these charges are deductable as a business expense. My advice to you is, if you are paid in cash you need to deposit that cash in your business account at the end of the business day. The reason for depositing your day’s receivable in the bank is to enable you to keep track of the income generated everyday. Failure to not make a deposit on a daily basis encourages you to use the cash for purchases not concerning the business such as your lunch or other incidentals.
Sometimes, some suppliers will give you a discount if you pay in cash. When this happens, write a cheque from the company to cash, write the name of your supplier at the back of the cheque and if you have a receipt write the number on the cheque. This will make it easier for your accountant to reconcile your accounts. The best way to pay is by cheque but sometimes it makes sense because of the discount you are receiving.
Pay yourself with a cheque. Write a cheque from the company to yourself for the amount you want and deposit it to your personal account. It is never a good idea to just dip into the cash and take whatever you want. Writing a cheque to yourself again makes it easier for the accountant and you will spend less time explaining to him what happened to the receivables and more time building your business.
It is always a good idea to have a cheque written to Petty Cash which you can use for small purchases for the business making sure the receipts are also kept for the accountant. Never ever use the cash to make personal purchases.
Collection of Government taxes by your company. I recommend that you have another account set up just for the Government Taxes. Too often the business owner is scrambling when it is time to remit the Government Tax you collected. Money due to the Government should be deposited in that account every time you go to the bank so when it is time to pay you are able to pay. Remember this is not your money.
Owning your own business can be fun and also very challenging. It is best to hire a proper accountant rather than letting Auntie Maggie help you out. The cost of the accountant is deductable as a business expense and it will save you many stressful hours when the government comes calling. Make sure to file your business income tax every year. The most important thing you must remember is that you have to deal with the Government for Income Tax and Business Tax. Keeping proper records can make your life a lot easier if you have to deal with a government audit.
These are some useful tips I would like every small business owner to practice.
Tessa- Marie Shillingford is the author of Controlling the Debt Monster. She is Personal Financial Planner, with a designation from the Institute of Canadian Bankers, and a Financial Counselor certified by the institute of Canadian Banker. She is presently a Program Facilitator of Financial Literacy at JVS Toronto. Tessa- Marie was employed by TD Canada Trust for twenty years in the retail section of the bank. During her tenure at TD Canada Trust she held various positions interacting with customers of the bank. As a Financial Advisor and Manager of Financial Services she led a group of Financial Advisors in helping customers of TD Canada Trust successfully manage their finances. Details of her book… Controlling the Debt Monster, can be found at http://www.controldebtmonster.com