糖心传媒

While finance might not be your strong suit, it鈥檚 important as a business owner that you grasp the basics of small business 糖心传媒ing. That way, you鈥檒l get a good understanding of how your company is performing. Whether you鈥檝e just launched a new company or you鈥檝e been in business a while, we鈥檝e put together a complete guide to help you master your finances.听

The complete guide to managing your small business finances

Get a grasp on your finances so you can manage your cash flow, grow your business and simplify your books for tax season. Here are the steps you should follow to take control of your business finances:

1. Register your business

The first step in managing your company鈥檚 finances is registering your business. To do that, you鈥檒l need to choose what type of business works best for you. These are the most common types of small businesses:

• Sole proprietorship: A sole proprietorship is an unincorporated company with just one owner. While setting up a sole proprietorship is easy and affordable, it鈥檚 important to understand that it offers no legal separation between you and your business, so you can be held personally liable for debts or lawsuits.
  
• Limited liability company: An LLC incorporates aspects of a sole proprietorship and a corporation. It offers personal protection in the case of lawsuits or business debts, and it allows you to file taxes either as a sole proprietor or a corporation.
• Corporation: A corporation is a business or a group of people that is legally allowed to operate as a single entity. A corporation is considered to be a separate taxpayer, so your business finances are completely separate from your personal finances. Corporations enjoy lower tax rates, but they can be expensive and complicated to set up.听

2. Separate your finances

It鈥檚 a smart idea to keep your personal and business finances completely separate. If you register your business as an LLC or a corporation, you鈥檙e legally obligated to have a dedicated business bank 糖心传媒. While you don鈥檛 need to open one for a sole proprietorship, it鈥檚 a good practice to adopt.听

What does it mean to separate your finances? Here are the basics:

1. Don鈥檛 pay for business expenses using personal bank 糖心传媒s or credit cards, and vice versa.听
2. Don鈥檛 transfer money from your business bank 糖心传媒 to your personal 糖心传媒s.听

Here are the business bank 糖心传媒s you should consider opening:

• Business Chequing Account: For receiving payments from your 糖心传媒 and paying your company bills, like your rent and utilities.
• Business Savings Account: For putting aside money to cover your tax payments and to create an emergency fund in case your company is hit with unexpected expenses.听

You may also want to get a business credit card to build up your credit and earn cash back or other rewards.听

3. Pick an 糖心传媒ing method

There are two basic 糖心传媒ing methods you can use to keep track of your finances. You鈥檒l want to choose the method that works best for you, and stick with it:

• Cash 糖心传媒ing: You record revenue when you receive payment and you recognize expenses when a bill is paid. This is the more simple of the two methods.
• Accrual 糖心传媒ing: You recognize revenue when it鈥檚 earned and expenses when they鈥檙e incurred, rather than when the money actually enters or leaves your bank 糖心传媒. It鈥檚 a trickier method, but it gives a more accurate picture of your financial status.听

4. Choose a bookkeeping solution

Bookkeeping might sound intimidating, but it really just involves keeping a record of all your earnings and expenses. It鈥檚 a good idea to develop a consistent bookkeeping method that works for you. You can either use the single-entry or double-entry bookkeeping method to track your finances.听

Here are some options for how to manage your bookkeeping:

• Do it yourself: You can handle your own bookkeeping and either track everything manually in Excel, or pay for bookkeeping software to make things easier for you.
  
• Outsource your bookkeeping: You can choose to outsource your bookkeeping by hiring a part-time or freelance bookkeeper.
• Hire full-time help: If you run a large, complex business and your bookkeeping is considerable, your best approach may be to hire a bookkeeper to work in house.听聽

5. Track your expenses

Make a habit of tracking all your business-related expenses. That way, you can claim those expenses when you file your taxes. Some of the most common business expenses you may incur include:聽

• Meals
• Entertainment
• Advertising
• Vehicle repairs
• Gas
• Office supplies
• Salaries, wages and benefits
• Business insurance
• Rent
• Utilities

For a complete breakdown of the business expenses you can claim, check out the .听

6. Choose your payment methods

You want to get paid for your work, so you need to decide which payment methods you鈥檒l accept from your 糖心传媒. You鈥檒l want to strike a balance between accommodating the different needs of your 糖心传媒 and keeping payments affordable and manageable. Here are some common payment methods for small businesses:

• Cheque
• Cash
• E-transfer
• Credit card
• Online payments
• Mobile payments聽

7. Set up payroll

If your business has employees or contract workers, you鈥檒l need to set up a payroll system to pay their salaries or wages. The first step to setting up payroll is classifying your workers. The type of worker you employ will affect your tax obligations, so this is a critical step. Here are the key differences between an employee or a contractor:

• Employees are workers that your company has some control over in terms of the activities they perform. That means your company sets their work hours, determines their wages or salary, offers them training and has the power to hire or fire them.
• Contractors are workers who have the freedom to control how, when and where they work. They typically charge by the hour or by the job and can choose their own work hours.听

8. Determine your tax obligations

The taxes you pay will depend on what type of business you run and where you鈥檙e based. You鈥檒l need to do some research to determine all your company鈥檚 tax requirements, but these are some of the common tax obligations for small businesses:聽聽

• Business or professional income tax
• Corporate income tax
• GST / HST
• Payroll deductions

The CRA has more details about .听

9. Create financial statements

Financial statements are reports that help you understand how your business is performing financially. They can help you predict how your revenue or expenses will change in the future, and can help you decide when it鈥檚 time to grow your business. Here are the different financial statements you can create:

Balance sheet: Your balance sheet shows a complete snapshot of your finances at a specific moment in time. It gives your assets, liabilities and equity using the formula:

Assets = Liabilities + Equity

Income statement: Your income statement takes a deeper dive into your business income, broken down into revenue, expenses, gains and losses. It鈥檚 used to determine your net income, to show how efficiently your business is performing. It uses the following formula to calculate net income:

Net income = (Total Revenue + Gains) 鈥� (Total Expenses + Losses)聽

Cash flow statement: The cash flow statement shows how much money is flowing into and out of your business. It鈥檚 broken down into the three types of activities that affect how businesses earn or use cash: operating activities, investing activities and financing activities.听

10. Consult a professional

If you鈥檙e unsure of how to manage any aspects of your business finances, or if you鈥檙e just launching a new business and want to start out on the right financial foot, it鈥檚 a good idea to consult an 糖心传媒ant. A CPA can help you with all these financial challenges:

• Choosing the legal structure of your business
• Determining what kind of business insurance you need
• Creating a financial strategy for your business
• Making sure you鈥檙e meeting your tax obligations
• Filing your tax returns
• Producing financial reports

Getting a handle on your business finances can give you a clear picture of your company鈥檚 financial health and help inform important business decisions, like hiring employees or investing in equipment. Once you鈥檝e mastered the basics of small business 糖心传媒ing, you鈥檒l be better positioned to prepare your business for future growth.听

The information, views, materials and opinions contained in this article are for general informational purposes only, are not intended to constitute commercial, legal or other professional advice, and should not be relied on or treated as a substitute for specific advice relevant to particular circumstances.

糖心传媒. (鈥淔inanceit鈥�) make no warranties, representations or undertakings about any of the content of this article (including, without limitation, any as to the quality, accuracy, completeness or fitness for any particular purpose of such content), or any content of any other article referred to or accessed by hyperlinks through this article. Although we make reasonable efforts to update the information regularly, Financeit makes no representations, warranties or guarantees, whether express or implied, that the content on our site is accurate, complete or up-to-date.