Ahh, the excitement of starting a business. You’ve made everything official, from the license and logo to the website, business cards, and social media accounts. You’re ready to open your virtual doors and start booking clients – but are you really?
Most small business owners will feel lots of growing pains in their first months (or years) when starting out, but not all mistakes need to happen if you know how to prepare for them or avoid them altogether.
Unless your business is accounting, most business owners won’t know much about balancing their books and keeping track of their cash flow, especially in the beginning.
You can’t be expected to be in the green the first month you start, but you do need to figure out your pricing from day one based on your start-up costs and financial needs. There are costs like ongoing advertising and marketing, business tools, website fees, cell phones, and computers. Not all of these are monthly fees, but they are the cost of doing business.
Once you know the monthly costs of running your business, you need to think about paying yourself! You started this business to make money, which includes planning to pay yourself a salary, even if it’s just $15 a week/month to get started! Make a personal budget of all your monthly expenses. Knowing how much you need to get paid, and starting the habit of paying yourself, will get you well on your way to full-time self-employment.
TAKING ONLINE PAYMENTS
Finding and setting up the right CRM for your business comes down to your overall business needs – does it need to track inventory, do you need built-in design software, or do you simply want to send an invoice and contract (which is what Rock Paper Coin does best!). Once you know how much you need to charge your clients, you need to figure out how you will be paid. Many new business owners make this mistake when signing up for a new CRM or platform: getting one that does more than they currently need or that they simply can’t yet afford.
For example, you may be able to afford the monthly or yearly fee, but can you afford the additional credit card processing fees, and do they charge for anything else on top of that? Our friend Braden Drake, a California licensed attorney and tax professional, says it best:
“Processing fees should be viewed as business expenses. If your business income was not covering your expenses, you would raise your prices and/or cut costs. The goal of your business is to make a profit, and the higher your profit margins are after expenses are paid, the more money is available to pay yourself. When setting package prices or hourly rates, are you factoring in how much money you’ll be taking away after deducting taxes, processing fees, and other expenses into that pricing? That’s really the key. We’re running businesses, not expensive hobbies.
In addition to cutting expenses, changing your prices, and evaluating which of your business offerings are the most profitable for you, also look for an invoicing platform with more affordable payment processing fees. Like Rock Paper Coin whose payment processing is just a flat 2.5% compared to other invoicing platforms that can charge up to 2.7% – 3.5% plus fees”
PLANNING FOR AND PAYING TAXES
It’s not everyone’s favorite word, but taxes are at the heart of your business income. Whether you pay quarterly or annually, seeing your hard-earned revenue get put to the side for Uncle Sam isn’t easy, but it’s even more critical to ensure you’re doing it right!
If managing finances doesn’t come easy to you, the best money ever spent will be on a professional accountant and tax professional. These pros will keep your business in good standing, from helping you navigate how much you need to be setting aside from each payment to what incentives and tax breaks you qualify for.
Pro tip: when looking for a new CRM look at how finances are tracked. Rock Paper Coin bookkeeping feature keeps record of all your payments (credit card, check, etc) and easily exports your finances right from your account so you can send them to your accountant or tax pro anytime! You can read more about that here.
As a tax professional, our friend Braden shows business owners lots of ways they can write off business expenses or report deductions and one of those is processing fees.
Braden says “ Yes! You read that right, processing fees can be deducted from your taxes, but there are specific guidelines for who can claim those deductions. Here’s how to find out if your business is eligible for deducting your processing fees”
Ready to see what all the buzz is about? Check out Braden’s Profit RX program to get your accounting and tax system in order, then head to Rock Paper Coin and use code BRADEN to sign up for free today PLUS receive 25% off your entire first year!