Granite Mountain Accounting works with a number of solopreneurs and small business owners. Time and time again, we find ourselves in conversations about how to manage business finances. Specifically, our clients want to know about keeping personal and business expenses separate and how to make sure their business is safe.
There is a lot to consider when managing business finances. However, it doesn’t have to be overwhelming. By taking one thing at a time—and perhaps hiring a local accountant—you can take control of your financial position. Nothing is more empowering than being able to make decisions based on knowledge. Let’s dive in.
How can I keep personal and business finances separate?
The first thing to do in almost every instance is to incorporate your business. Whether you choose an LLC, a partnership, or something else, protecting yourself by establishing your business as a separate legal entity will set the right foundation for keeping personal and business finances separate.
Additional steps you can take include:
- Opening a separate bank account for business funds
- Building your business credit with separate credit cards, vendor accounts, and/or small business loans
- Set up any utilities for your business in the business’ name
With more people working from home than ever, it’s extremely easy to mix your work life with your home life. Even if you don’t have a physical office, try and separate the two as much as possible. This includes keeping your business receipts in a separate filing system and keeping your business budget and home budget separate. It may take a bit of trial and error depending on your specific set up, but you can separate your personal and business finances with practice and structure.
What’s the best way to manage quarterly/estimated taxes?
As the saying goes, “a failure to plan is a plan to fail.” The good news is, you can have a plan to manage your quarterly business taxes because there are specific due dates to be aware of that you can mark on the calendar. Quarterly taxes are due four times per year.
For the remainder of 2021, quarterly taxes are due as follows:
- September 15, 2021 — taxes due on earnings from June 1 – August 31
- January 15, 2022* — taxes due on earnings from September 1 – December 31
- * A Saturday, so payment is actually due Monday, January 17
So, how do you estimate quarterly business taxes? You’ll begin with an estimate of your business income for the entire year. You can base the estimate off of previous earnings or what you’ve earned so far for the year. You’ll also need your business expenses, as well as your personal tax income. A tax professional can help you estimate your quarterly business taxes if you’re just getting started.
Is my business financially compliant?
You don’t have to be “too big to fail” to fail at financial compliance, and the risk at the end of the day is the same—from facing penalties to losing your business, or worse.
Even when you understand basic accounting, there may be issues that come up with financial compliance that stop you in your tracks. Do you know all of your local and state laws? How about federal guidelines for businesses?
As a small business owner, you might not have the means to hire a compliance officer. However, you can hire someone to provide compliance services, which may include an audit, maintain your business paperwork, and receive and respond to any legal paperwork on your behalf.
Are my business finances at risk?
This is probably a business owner’s biggest fear, especially coming out of the Covid-19 pandemic: that they won’t have enough to keep going or to pay their employees.
Yet a recent study shows that only 18% of small businesses seek out assistance for strategic planning and just 1 in 10 reach out to experts for help with risk management. And, 25% of small businesses aren’t sure what they need for financial recovery.
The first thing to remember is that you do not have to go it alone. There are many resources available for small business owners. A bookkeeper or tax professional can also help you navigate any existing or potential financial risks.
Some key items to consider when assessing your financial risk can include:
- Your current cash flow, investments, and expenses
- Whether you are behind on loan or bill payments
- Opportunities to file for relief or extensions on payments due
- Your level of exposure to risk (i.e. who has access to your business finances)
Get Help with Business Finances
Regardless of the size of your business or your financial situation, Granite Mountain Accounting is here to help. You can schedule an initial consultation to get more information about tax guidance, bookkeeping services, compliance, or any other financial issue you have questions about.
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