How to manage your business finances

Many small business owners find that managing their business finances seems to constantly fall down the to-do list. With the day-to-day demands of running their business, they can often feel overwhelmed with having to take on any additional tasks. However, failing to manage your business finances can be a crucial mistake. If you don't know where you are financially it can be almost impossible to guide your business toward growth and long-term profitability. So while most people would definitely consider business record management to be grunt work, and tend to give it a low priority, good business finance management (with the accompanying record management) not can make your working life easier, but can give you real stress relief at tax time. Here's what you need to know about how to manage your business finances-

• Always keep your business and personal expenses separated-While this can sound easy this is the part of record management, that trips up most people. It is crucial to have a clear understanding and know what qualifies as legitimate business expense and what doesn't, and be sure that your business record management reflects this accurately.
• Always get sufficient documentation for all business expenses-This is another common problem that many business owners fall into. Many business owners/managers make the mistake of thinking that "lists" are good enough for record management purposes. For example, they have a list of purchases on their credit card statements, and think that that's good enough in terms of claiming those purchases as business expenses. This may not be good enough if you have to justify expenses or worse yet are facing an audit. In terms of good business record management, there are two points to bear in mind:

1. You should always get a receipt-You need to get in the habit of asking for a receipt, whenever you make a purchase, no matter how small. Little expenses add up, and you need the documentation for your business records. Make this a part of the process when you purchase anything. 2. You should label your receipts-This can be helpful because there are still businesses around, that hand out receipts that do not have anything on them, except the date the item was purchased, and how much it cost. This really is not very helpful when you are staring at a receipt, trying to figure out what the item in question was, and which business expense category it fits into. A quick label as tow here you were and what you bought can go a long way. When you get a receipt, take the time to look at it and write the missing/relevant information on it, such as what the receipt is for, and the expense category.If you are unsure of how to handle receipts there is lots of advice and help online to find a system that works for you.

• Always get a separate bank account for your business, and use it-While the fees for business bank accounts can be high compared to personal accounts, a business bank account is absolutely necessary, for good business record management. A business bank account will help you keep your business, and personal expenses separate. You should from the very beginning deposit all your business revenues, into the business account, and withdraw any business related expenses or payments, from the business account only. Many new business owners are wondering what kind of business bank account to get. Experts advise that you start with a checking account, preferably one that delivers monthly statements, and returns your cancelled checks to you. Business checks help make your record management easier, because you can use the memo line on the front of each check, to document the business purpose of the expense.