How to get your finances together after a year in business
/This post comes from Bench, America’s largest bookkeeper for small businesses. If you’re looking to get professional bookkeeping support for loan applications or tax season they can help you get started—you’ll also get a special discount with my referral link!
In your first year of business, it’s easy to let tasks like bookkeeping and tax preparation fall on the back burner. That’s okay for a little while but as your business grows and you get more focused on budgets, revenue, and profit, these administrative tasks become key to your financial success.
Since there’s no time like the present, we’ve put together answers to some of the most common financial questions facing entrepreneurs in their second year of operations.
I run a small business, how important is bookkeeping?
As your business grows and you get more focused on budgets, revenue, and profit, bookkeeping becomes key to your financial success.
If you feel in the dark about how much you’re spending or when you’ll be able to scale your new venture—it's time to get serious about bookkeeping. You can choose to do it yourself with a tool like Excel, or take a more hands-off approach with a service like Bench.
Whatever method you decide on, up-to-date books help you:
Create a business budget that takes incoming and outgoing spending into account
Stress less at tax season (no more rummaging through a shoebox of receipts)
Understand the health of your business and make financial decisions with confidence
Learn which kind of bookkeeping is best for your small business: Cash Basis Accounting vs Accrual Accounting
“How do I find an accountant before tax season?”
If you struggled during tax season last year, it might be time to bring in a professional. A good accountant can file your taxes for you, assist with audits, and help you make sound financial business decisions. But how do you find someone worth their salt?
The ideal candidate should understand what you do and the tax laws for your industry. Ask people in your industry if they have a referral, and don’t be afraid to shop around until you meet “the one”, many accounting businesses offer free consultations.
Your tax professional can tell you:
Which expenses you can deduct and highlight new ones you may have missed
If there’s been changes in tax law that could affect your business
Where you’re wasting money and where you can save
Get the most value from your tax accountant with these tips: How to Find a good tax accountant
Should I open a business bank account?
Nothing says “I mean business” like a dedicated business bank account. Keeping your business and personal finances separate makes it easier to manage your expenses and stay on top of bookkeeping and tax filing (your accountant will thank you).
Plus, if your bank is familiar with you and your business, they’re more likely to approve a loan request in the future.
When searching for the right bank, there are a few things to consider:
Do they have minimum balance requirements or other fees?
Will they let you take out a business loan or line of credit?
Will you have access to physical ATMs in your city?
For more business banking advice: How to Open a Business Bank Account
I want to grow my business, how do I get a loan?
You’ve laid the foundations of your business, now it’s time to build. Whether you need better equipment, more office space, or simply want to start building good credit for the future—a business loan can help you achieve your goals.
Preparing for the loan application process starts by gathering documents. You’ll need a business plan, financial projections, income statements, cash flow statements and balance sheets. (If you don’t have financial statements ready, Bench can complete months or years of your overdue bookkeeping quickly.)
Before you apply, here are a few things you can do to improve your eligibility:
Post collateral assets like business vehicles, equipment, or accounts receivable
Cut down on inventory. This will leave more of your assets as cash each month
Review your monthly recurring expenses and see where you can cut back
And remember, only borrow what you need to avoid paying extra interest.
Find the right loan for you: The Very Best Small Business Loans
