The Complete Guide to Business and Finance

What could be more exciting than starting your own small business? Workers of all sorts dream about branching out from their standard nine-to-five and starting a new enterprise of their own. There are many benefits of this kind of work: you get to be your own boss, after all, and the power is in your control. 

This is why many small business owners rank among the most satisfied workers in the country. 

However, that doesn’t mean running your own business is without a fair share of challenges. You’ll need to become highly knowledgeable about business and finance if you hope to keep your new enterprise afloat or turn a profit. 

What do you need to understand about these two all-important topics? How can you learn to manage finances for your business? Read on and we’ll walk you through the basics. 

Crafting a Business Plan and Budget

The beginning stage of almost any kind of business will have some similar overlap. Before you can do anything, no matter what type of industry you’re hoping to get into, you’ll need a plan. 

In most cases, this plan will take the form of the more officially titled Business Plan. Almost every business that exists today started out as a business plan and a dream. Your business will start out the very same way. 

What’s in a business plan? In short, it should contain nearly everything that a person might want to know about your new business enterprise. It should contain a complete breakdown of your business idea, digging into what you’re offering customers and how. 

You’ll want to get into the nitty-gritty details here too. This isn’t the time to get broad or general.

Your business plan should contain some details about your brand identity. What is the tone and voice of your business, and what kind of vibe or atmosphere are you hoping to get across to customers? If you have a brand name, design, color scheme, or anything along those lines, it should be in this document. 

The business plan should also contain a breakdown of your budget. You’ll need to calculate what your startup costs will be and then what your monthly expenses for running your business might be. 

With these financial pieces in place, you should also do some calculations about how much of a profit you’ll need to turn to get into the green, and you should project how long it might take for your business to get there.

Remember, very few businesses are profitable right away. 

Crafting a Business Plan Budget

If you’ve never launched a business, and thus have never made this kind of plan before, you may feel yourself getting nervous about making this all-important budget. How should you approach the task at hand? 

It’s best to take things one step at a time.

First, try and land on a number that you can set as your total budget. There are a few ways to land at this number.

First, consider how much you’d be willing to spend to get your business up and running. If you’re putting the money up out of pocket, consider how much is realistic. 

It also can help to do some research when trying to land at this number. Dig around online, or try and talk with business owners in the same industry in your area. 

How much did they need to get their business up and going? These numbers can be a great reference point for you, as you don’t want to land too low or too high with your budget. 

Start-Up Costs & Monthly Expenses

Once you’ve got a total budget in mind, it’s time to break down all your various start-up costs. This will take a good bit of brainstorming.

Before you even start putting dollar amounts down, just try and make a list of everything that would need to be in place for you to be able to do your first day of business. That includes equipment, product, decoration, labor, and anything else that might be needed to make your business run. 

Once you’ve crafted your list, try organizing it. Which elements are completely essential, and which are non-essential? Are there items on the list that you’ll need, but perhaps not right away? 

Organizing your list in this way can help you to slim down your startup costs if you find you’re pushing your budget too much. 

Use the same approach to come up with your monthly expenses. Make a list of everything that might cost your business money on a weekly basis and tally this list up. 

With your start-up costs and monthly business expenses in hand, you should be able to see how much debt you’ll be in after a few months of doing business. How well will you have to do to turn things around and make a profit? 

Doing this exercise might inspire you to re-think your business idea, perhaps slimming down your startup needs, raising your prices, or crafting a new angle on your business altogether. 

Finding Business Financing Options

Once you have a sense of how much money you’ll need to get your business up and running, you can start the somewhat difficult work of trying to get these various funds together. 

There are many different methods one can look into when it comes to business funding. If your costs are low enough and you have enough liquid cash yourself, you might be able to put the funds you need up alone.

However, this will be a rare situation for most business owners to find themselves in. 

More than likely, you’ll want to look into some kind of loan to ensure that your business gets financed properly. Most banks offer some kind of business loan. This is where the bank offers money based on your business plan and you pay the bank back with interest as time goes by. 

The federal government also provides small business loans, though these are often also provided through local bank branches. The federal government bank loans, however, are built to have low-interest rates and are backed by the government itself.

That means banks have to take on less risk when giving these loans out, making them more accessible to business owners of all kinds. 

For this reason, however, small business loans from the government can be competitive to receive and take a long time to apply for. If you think you might want to obtain a SBA loan for your business, it’s something you’ll need to start the process of working towards early. 

You might also want to look for individual investors from your life who may have the funds to put in and turn your business idea into a reality. 

Setting Up a Business Bank Account

Your business plan will serve as an important blueprint for yourself, and a helpful guide to others you hope to bring into your business.

But before you’ll be able to accept investments or do any kind of work for your business, you’ll need a bank account made out in the business name.

Registering With State Government

As you get started with your business, you’ll need to get it recognized officially by the state government in which you reside. This is an important part of the creation process of any new business and not something you can skip over – it’s legally required. 

The process for submitting with the state will vary location from location, so you’ll need to do a bit of research on how to do it where you are located. In short, however, it should require submitting some paperwork and allowing a good amount of time for processing.

On the other side of this wait time will be an EIN, or employer identification number. This number functions like a social security number for your business, allowing the government to track and identify it via this string of numbers.

You’ll need an EIN in most cases to open a business bank account, which is why it is important to try and do this work as early in your business life as possible. 

Business Bank Account Creation 

As a business owner, it’s essential that you don’t get your personal finances and your business finances mixed up. Doing so not only will put your personal financial stability at stake, but it will also create numerous headaches come tax time. 

Setting up a business bank account will allow the transactions for your business and those in your personal life to remain separate. 

Opening a business checking account at your local bank branch shouldn’t be too difficult, and it’s something you should do the moment you get an EIN. You’ll need to provide a wealth of information to the bank about your business, but luckily, this should all be information you already have from your business plan document. 

This bank account will become the place where you deposit all of your business income.

It will also be the same account where money will come out to pay for various businesses expenses. Your personal payment will also come from this account, getting transferred from here to your personal one as a form of payment. 

Your bank should also be able to provide you with a business credit card. This credit card can be used to make transactions and handle expenses for your business.

It will work like any personal credit card you’ve had, but should be kept strictly for your business-based expenses.

Tax Season For Your Business

If you’re thinking ahead, it might also be smart to open a business tax saving account. This is where you can put money aside to pay for your taxes. Talking with some skilled business tax advisors can help you to maintain and properly establish this kind of account. 

Having a separate tax account set up will ensure you have the money to file taxes when the time comes around.

Not having the funds on hand when it becomes time to pay the piper can be a stressful situation for any business owner, and you can avoid it by planning ahead in this manner. 

Keeping Accurate Financial Records

Bookkeeping is a big part of running a business of any size. It’s essential that you keep accurate financial records of all your transaction when it comes to your business. Every dollar needs to be tracked.

This is important to the federal and state governments, who will want to ensure that you are paying your proper tax burden. It will also be important to your own business practices, as you’ll need this information to track your successes and failures. 

For all money that moves in and out of your business, you should keep track of the date, amount, and payer. You should then organize this information into different categories depending on what kind of transaction it was. 

There are many different ways to approach the process of bookkeeping. Many small business owners do this kind of work in a basic spreadsheet, or invest in simple, digital programs that were built for this purpose. 

At the end of the day, you’ll need to decide yourself on what the best system for you and your business is. 

Understand Business and Finance

The world of business and finance can be complicated and nuanced. If you’re brand new to this world of enterprise, there’s a lot to learn. However, it doesn’t have to be difficult, and can actually be exciting and interesting.

The above are just some of the most important basics you’ll want to know about the intersection of business and finance.

Need more information and advice about running a business? Keep scrolling our blog for more.