5 Helpful Financial Tips for New Small Businesses in 2022
The early days of my business were both magical and daunting. The pinch-me moments also came with new and stressful responsibilities. I’m sure fellow business owners can relate! The quickest path to success for me was having a clear idea of my business finances and having procedures in place to ensure I was on the right track. Today I have 5 helpful financial tips to share with you to get you off on the right foot.
Here is how I’d go about setting up a new business for financial success:
1. Register Your Business Name
Your very first business step is going to be to register your business name.
If you are operating under your own name, you don’t need to register in the Province of BC. However, if you operate under a name that is not your own or adding any additional words to your given name (e.g. Jane Smith Marketing Specialist), you will have to register.
Doing a name search is free and easy, will save you the unfortunate and costly instance of accidentally using a name that’s already taken!
2. Open a separate business bank account:
Ensuring that there is separation from your personal and business life is critical to success. This cannot be overstated. By doing so, you will save yourself a headache and an accounting nightmare. I always tell my clients that you can’t do this soon enough!
Hint: If you are a sole proprietor, it is much cheaper and easier to open a second personal chequing account and designate this account for business only use. Banks will try and offer you specific “business accounts” which is required for incorporated businesses (who require the account to be in the business name) but not necessary for sole proprietors.
3. Register and start charging GST
When you start a business, I always recommend registering for GST as early as possible. The CRA will require you to register once your revenue surpasses 30k in worldwide sales, however, there are many benefits to registering early including:
- It protects you from potentially registering too late and facing fines or penalties.
- It avoids having to advise your customers to the change in their invoice amount.
- It prevents you from putting a revenue bottleneck on yourself.
- You can take advantage of input tax credits
The main thing to be aware of with GST is that everything collected by this tax goes back to the government. It is the cost of doing business that you don’t get to keep. Not to be confused with revenue! Check on the CRA’s website to determine if you are selling taxable goods and services. If you are on this list, you must charge GST once you reach that $30k mark in sales.
Listen to an in-depth conversation on my podcast, Financial Conversations, on this very topic!
4. Create and follow a Financial Budget
Having a plan for your money will help keep you focused and accountable to your business goals. Reviewing it regularly will also have you second guessing how each expense effects your bottom line. In just four easy steps, you can set up your business budget and bask in the glow of a strong financial future. Check these off as you go:
- Start by goal setting: You need to know the gap between how your business is currently performing to where you want it to be.
- Revenue planning: Include your revenue projections into your budget, be as detailed as you can be here. List your products and/or services and monthly volume targets.
- Expense management: Review all your past yearly expenses and determine if they are still essential. (Don’t forget money to pay yourself!)
- Review: Review the total revenue, expenses and profit; and adjust if necessary.
For more information on how to set a budget (including downloading your free budget template), check out this blog post.
5. Go Forth and Make Money!
Starting a business should always go hand in hand with financial prosperity. With the right systems, a solid understanding of your numbers and how they impact you and your business, you should be well on your way to success.
As with all big things in life, building a financially sound business takes time and consistent effort. So don’t feel discouraged if things take longer than you anticipate. It’s better to be safe and have the financial resources in front of you than take unnecessary risks.
If you need any guidance on how to do this, or for more helpful financial tips, please feel free to reach out to us at Clear Margin Consulting at email@example.com.