Every business owner must display certain financial habits for their business to succeed. Leaders have key characteristics that set them apart from other people. In the same vein, successful entrepreneurs tend to have a lot of similarities, and these features are many times, which make them successful in the first place. As an SME founder, you cannot afford to do things the way others do them.
You simply cannot afford to do things as you’ve always done. You have to inculcate essential financial habits to ensure that your business is successful in the long run. Your ability to adapt and adopt these habits greatly impacts the chances your business has at success. Not only will you outperform other small businesses, but you’ll also stand out and make a difference. Some of the most important financial habits to have include:
Have a Budget and Stick with It
A budget represents an expectation or estimation of your business results. It includes how much you hope to make in your business, and also how much you’ll be spending, investing, and so on. Often times, it provides a financial roadmap to guide you carefully to the attainment of your business goals.
Budgeting is something done in advance, say ahead of a month. You should set a budget on the first day of every month, estimating how much income you hope to receive that month and how much you’ll spend on your expenses to have a sense of direction for your earnings.
It will also show you the deliberate things you need to do to earn more and guard your funds against impulsive spending. A budget does not end after being prepared. It also requires that you review your performance on the budget at the end of the month to ascertain how close or far it is to your reality.
Did you overspend? Did you miss out on important projects? By reviewing your budgets, you create an accountability system for you and your small business to be held by. This will help you make better decisions next month, knowing what works and what does not.
Review Your Finances Regularly
When investing in stocks, bonds, or even mutual funds, it is normal to choose to be nonchalant or passive about your investment and the volatility of your investments’ value. However, when running a business, you simply cannot choose to be nonchalant.
Every occurrence needs to be carefully assessed and top on that list to assess your financial performance regularly. Depending on what kind of business you run, review your business at the end of every season to know where your business is at and how you can get it to where you need it to be.
Have A Specific Account for Your Taxes
By saving specific amounts for your taxes, you’re able to account for the rest of your money without having to worry about government officials showing up at your door unannounced. The great part of this habit is that it helps you as a business owner to differentiate between your personal funds and the government’s money.
Reduce Debts Proactively
Debts aren’t always a problem. They only become so when there’s no strategic plan to pay them back. You could always take debts in the short-term to help your business grow in the long-term, but unnecessary debts will only drain your business’s finances.
If you have already pending debts, you need to figure out a way to pay them as soon as possible so your finances can finally be free. Be consistent with your payments, proactively reducing them and using them to meet only revenue-generating requirements.
Pay Yourself a Salary from What Your Business Earns
Putting yourself on a salary is also one habit that could set a successful business owner from another. This is because it helps you place caution on how you spend as your business money is not your personal money and vice versa. This habit helps you see clearly exactly how much your business has as an entity and how much you’ve earned from it.
Optimize Business Structure and Tax Planning
No one can escape liability and taxes, but you can always establish an optimal business structure for taxes and liability. Business structures are naturally divided into sole proprietorships, partnerships, and corporations, and there are different legal and tax requirements depending on what business structure you have. It is good practice to seek professional advice before choosing a business structure so you can have a clear understanding of the expenses that come with having them.
Contrary to popular belief, tax planning is not illegal; neither is it gaming the system. It’s perfectly legal, and it’s a method adopted by all large businesses to reduce the amount of deductions from their business’ income. If you don’t take advantage of all your tax benefits, then you’re only depriving your business of a chance to reduce expenses. This consciousness is another habit that top businessmen and women across the world have.