Creating strong financial habits is extremely important in ensuring success for small businesses. In 2017, a study of 1,700 small business owners was released revealing the most popular and successful financial habitats that were made across the United States. Small business owners who followed most of these habits excelled in their business and even surpassed competitors.
But what habits are worth getting into and produce the best results? Below you can find the top five habitats that you should be making as a small business owner.
1. Actively Managing Your Finances
Knowing the ins and outs of a business’s finances will help business owners keep on top of how the business is prospering. Weekly or monthly reviews of finances help a business owner gain a better understanding of their business and how it operates.
It gives insights of when you need to expand, need an increase of working capital, produce more or less product, and help to see if the business is vulnerable to any risks.
2. Stay on Budget
Budgeting helps a small business owner make smart decisions, and reduces the opportunity for impulsive and unnecessary purchases. At the beginning of every month, create a budget. Create a list of the estimated income you think you will receive throughout the month, on top of how much money you think you will spend on expenses, like inventory, salaries, bills, etc.
Revisit your budget at the end of the month, to see how close you stayed on budget. After doing this for a few months, you will find yourself getting better and better and budgeting, and spending less on frivolous items.
3. Utilize Tax Deductions To Your Advantage
Come tax season, make a habit of reducing the amount of money you will have to pay back to the government. Not utilizing tax deductions, is similar to throwing your money away. Write-offs and tax deductions reduce your taxable income, making you have to pay less. As a business owner there are many tax deductions that you can qualify for, but remember to put aside enough money aside to pay the remaining total.
4. Create The Best Possible Business Structure
To incorporate your business, you have several options to choose from including limited liability company (LLC), S Corporation, partnership, and sole proprietor. Regardless of which business you choose to operate, you should consider all of the factors. When choosing the right structure you can reap from its benefits, but by choosing the wrong structure, you may have to pay extraneous expenses.
5. Cut Down On Debt
Creating enough working capital, as well as gaining investors, based solely on revenue can be difficult. Often, small businesses turn to banks for loans or open up credit card accounts. Where having this additional money may be beneficial to your business, your debt can quickly add up. When you do start to build up this debt, it is important that you can pay it off immediately as to not suffer in the long run.
Maintaining a combination of these habits as a small business owner will help you gain the success you need to prosper.