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Have you recently started your own home business, but aren’t sure how to handle the finances?  Are you nervous when it comes to business debt, budgeting for the future and balancing your gross/net figures?  Below are some helpful tips to guide you through some of the most difficult tasks of business finance. You can accurately and consistently manage your business finances without a lot of stress if you’ll implement the simple principles below.

Finance Starting Point

In order to manage your home business finances, you need a definite starting point.  This will be a summary of your entire financial assessment for your business. Note of Warning:  Often, a home business finance plan mingles with personal finances.  Try to keep these as separate as possible for tax purposes and to avoid confusion.  Even if you buy something personal with business money, write it down so you’ll be sure not to include it as a business expense.

Your Starting Point Assessment Should Include the Following:

*Most Current Gross Profits/Loss of the Business

*Most Current Net Profits/Loss of the Business (your bottom line)

*Cash on Hand

*Checking Account Balance

*Debts/Loans for the Business (include payments due and balances)

*Assets

*Advertising Funds

*Miscellaneous Items having to do with your business finances

Once you have an assessment of where you stand financially with your home business, you can move forward.  The assessment is not your budget, but it allows you to create a budget based on realistic figures.  Budgeting on a dream is not wise with a business.  You might reach your goals, but what if you don’t?  Set your goals, but only budget for those amounts when you’ve actually reached them.

Creating a Home Business Budget

Most home businesses have a tremendous advantage over larger businesses because operating expenses are normally much lower.  There’s no building rent to pay, additional utilities, etc.  If you stay at  your desk most of the day, you will save on gas, car maintenance, etc. For this reason, it’s usually easier to budget for a home business. Based on what your business has profited over recent months, or your start-up cash if your business is brand new, write down all of your business expenses that need to be paid for each month or year to get a monthly estimate. What about your salary?  The salary must be determined only after your expenses are paid.  If there’s any left, you’ll still want to keep extra cash in your business account for emergencies or unexpected slow times.  You should determine your salary on the low end at first while building your business and stick with your salary amount to maintain a steady budget. For example, if you’re able to take a $350 per week salary in a brand new home business, that’s great!  Many home business owners work a full time job while building their business and take very little (if any) salary. If you have a business checking account or some form of online account for finances, you should deposit all funds into this account and pay your salary out of the account as well as your expenses.  Checking accounts make budgeting a simple process if you keep your checkbook well balanced at all times.

Create a Budget Based on the Following Categories (more if necessary):

Some of these items will be broken down into weekly figures, some monthly and some yearly.  However, you should calculate a monthly average in order to create a general monthly budget.

*Business Expenses (include supplies, equipment, phone, etc.)

*Insurance (business and personal health insurance can be included)

*Taxes (estimated figure from your accountant based on profits)

*Debt Repayment for any business loans

*Advertising (amount will vary, but you can set a minimum or maximum amount)

*Your Salary

Once you have a list of expenses for each month, write down due dates for each, and pay bills as they come due.  Pay on time, but not too early. Your money can sit in your bank account and draw interest in many cases while waiting on due dates.

Budget with Slow Times in Mind

Just because you have tremendous profits one month, this doesn’t indicate that you can raise your salary.  Leave money in your account for those slow times.  Also, budget in advance for payments which are due yearly.  It’s much easier to save a little each month than to be surprised with a large bill later. Following the simple budgeting guide above will enable you to keep an even pace while managing your business finances.  Handle your finances with care because this is the lifeline of your home business.

Curt Miller