Take advantage of every tax benefit available to you. By maximizing your write-offs and deductions, you’re reducing your taxable income and, therefore, you’re reducing the amount you owe in taxes.
3. Save funds for taxes
Put aside money for taxes immediately, so you don’t get blindsided or fined come tax time. If you have employees, set aside payroll taxes every time you run payroll. For your business income, it’s a good idea to set aside at least 90% of last year’s taxes or, if you’re a new business, 30 cents from every dollar your business earns.
4. Proactively reduce your debt
If your business has any debt, make consistent payments and reduce the principal amount by paying more than the minimum due each month.
5. Maintain a budget
Maintaining and sticking to a budget will help you make more informed decisions and identify potential problems early. Create a budget at the beginning of each month based on your estimated revenue and expenses. At the end of the month, compare your budget to your actual numbers. Eventually, you’ll be able to estimate your amounts more accurately to ensure you know exactly what’s coming in and going out of your business.
6. Keep personal and business expenses separate
As a small business owner, it can be easy to mix your personal and business expenses. There are several reasons, however, to keep them separate: tax issues, personal liability, and jumbled accounting.
7. Pay yourself a salary
An easy way to keep your personal and business expenses separate is to pay yourself a salary. You don’t have to cut yourself a paycheck twice a month, but regularly pull money out of your business account for your personal income. This forces you to separate your personal and business expenses and will encourage you to keep a budget in your personal life, too.