Unless you’re starting a business in the financial industry, bookkeeping and accounting might not be second nature. However, as an entrepreneur, keeping track of your profits and losses and knowing where you stand are crucial factors for business success.
Fortunately, you don’t have to go it alone when starting and growing a business. In chatting with Atiya Brown, owner of The Savvy Accountant — a CPA firm that works primarily with service-based and real estate professionals — Ramon Ray uncovered some valuable insights. Below, we’ve rounded up a few key takeaways from that conversation to help business owners improve their financial sense and money know-how.
Watch the entire episode on our YouTube or listen to our podcast.
Advice for Novice Entrepreneurs
For budding entrepreneurs, financial responsibility begins with a few crucial steps that can set you up for a successful launch and smart financial management for the long haul:
- Open a separate business bank account. Co-mingling money is a recipe for financial disaster. A separate business banking account lets you keep personal and business finances distinct, helping you maintain financial clarity, organized books, accurate record-keeping, and tax compliance.
- Consult with professionals early on. “It’s never too early to meet with an accountant,” Brown says, as well as a lawyer. Even if they’re not on your team full-time, these professionals can steer you on the right path, providing valuable insights into tax obligations, financial planning, and business structure.
Decoding Financial Professionals
Knowing which financial professional to consult is essential when you need personalized guidance. From bookkeepers to CPAs and tax attorneys, each plays a distinct role in financial management:
- Bookkeepers categorize transactions and maintain financial records. They ensure accurate record-keeping and help organize financial data for analysis and reporting.
- Accountants analyze financial data to provide insights and recommendations. They interpret financial statements, identify trends, and offer strategic advice to improve financial performance.
- Certified public accountants (CPAs) offer specialized expertise in tax and financial matters, ensuring businesses meet their tax obligations and maximize tax savings.
- Tax attorneys provide legal assistance for resolving complex tax issues. Note that the IRS stipulates that only three professions can represent you before the IRS: an attorney, a CPA, or an enrolled agent (EA).
- Financial planners with proper licensing and certifications might come into play once your finances are in order and you need help growing your wealth.
Navigating Business Challenges
Facing financial challenges is an inevitable aspect of entrepreneurship. Brown emphasizes that every financial hurdle is “figure-outable” with the right approach and expertise.
Tips for Overcoming Roadblocks
- Proactively address tax-related issues and IRS notices. Failure to file taxes or respond to IRS correspondence promptly can lead to penalties and legal consequences. Seeking professional assistance can help you resolve tax issues and avoid financial repercussions.
- Seek professional assistance with complicated financial matters. Some matters are best left to experienced accountants and tax professionals who can provide guidance tailored to your unique situation.
Best Practices in Financial Management
Not every financial matter is a hurdle. The more you stay on top of your finances, the more you empower yourself to make wise financial decisions. All it takes is a commitment to a handful of best practices.
1. Know your numbers
Whether you DIY it or work with The Savvy Accountant or another professional, you must have a way to track your numbers monthly — including your profit and loss, your balance sheet, and your cash-flow statement.
“One of the biggest reasons people are overpaying on their taxes is because they don’t know their numbers,” Brows says. “They aren’t aware of what they made and what they paid. So when it comes time to tax season, a lot of them are guessing, and that’s going to be a formula to make you overpay.”
2. Get organized
For some business owners, an organization is not their forte — their genius is doing what they do. So, don’t underestimate the value of working with someone whose superpower is getting organized — a professional to help you track your numbers and understand what’s happening in your business.
You can also utilize technology to cut the chaos, automate processes, and free up your time. The goal is to do less of the things that take you away from your business — and more of the things that led you to start a business in the first place. That brings us to best practice #3.
3. Leverage cloud-based accounting software like QuickBooks or XERO
Although Excel has its strengths, it requires constant upkeep. With cloud-based systems, you can sync with your bank account for real-time financial tracking. These tools also put routine accounting tasks on autopilot, such as invoicing, expense tracking, and bank reconciliation, saving you time and reducing the risk of human errors.
4. Monitor account statements
Reviewing financial statements lets you track revenue, expenses, and cash-flow trends. You can then use this information to improve your business processes and make informed decisions.
How to Select the Right Financial Partner
When selecting a financial professional, aim to hire professionals who:
- Have specialized knowledge and experience relevant to your industry and goals.
- Answer your questions succinctly in ways you understand, breaking down complex topics into bite-sized pieces. “A red flag for me would be if somebody says, ‘Don’t worry; I’ll handle everything for you,’ ” says Brown. The IRS will put you on the hook the same way as the person preparing your taxes, so you need to understand the basics.
- Can scale with you.
- Combine value and expertise, adding up to a worthwhile investment; expect to pay around $500 monthly for someone with all-inclusive services or around $99 for a membership-type service where you DIY most of the work.
- Skip the judgments. Every entrepreneur has to start somewhere. If your books are a hot mess, you want a provider like The Savvy Accountant that operates in a no-judgment zone.
Empowering Entrepreneurs with Financial Literacy
Gaining clarity on your financial situation is one of the most crucial steps you can take as you start and grow a business. With the proper support, you can get a handle on your finances without feeling guilty or ashamed about it. You’ll also prepare yourself for new opportunities and position yourself for more growth.
If you’re ready to grow in your financial literacy and improve your business’s financial situation, head over to The Savvy Accountant, and follow ZoneofGenius.com for more insights and tips.
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