African Young People: 7 Financial Habits of Successful Small Business OwnersJavnyuy Joybert
1. Regularly review finances — 69 percent of small business owners do this.
weekly and monthly financial reviews are an exercise in understanding the frequency and scale of your business operations and the extent to which your business may be growing or at risk due to clients who pay late.
2. Maintain a budget — 47 percent of small business owners do this.
A budget is simply an expectation for business results. At the beginner level, make a budget on the first day of the month to estimate how much income you’ll receive that month and how much you’ll pay out in expenses. Then review the budget compared to actual results at the end of the month. Rinse and repeat.
3. Save appropriate amount for taxes — 52 percent of small business owners do this.
Money you set aside for taxes isn’t really your money. It belongs to the government. That’s why it’s best to set it aside immediately and not get it confused with your remaining business income.
4. Proactively reduce debt — 50 percent of small business owners do this.
Sometimes debt is good. You take on debt in the short-term to enable longer-term health and growth for your business. However, unnecessary debt is a drain on your business. And more importantly, once you have business debt, it’s important to make consistent payments, and proactively reduce the principal amount.
5. Pay yourself a salary from business earnings — 49 percent of small business owners do this.
The term “salary” may not apply to your business. You don’t have to send yourself a regular bi-monthly paycheck. Instead, you can pull money out of your business account at regular intervals to set aside your personal income. When you pay yourself, it forces you to think about your business and your personal income separately.
6. Establish an optimal business structure for liability and taxes — 64 percent of small business owners do this.
Common business structures are sole proprietorships, partnerships and corporations. Each structure has different legal and tax requirements. While more self-employed professionals are choosing to incorporate, a corporation might not be the best structure for your business. If you’re not sure which structure is best for your business, you may want to seek professional advice because of the expense involved in changing and maintaining a business structure.
7. Maximize tax write-offs and deductions –– 65 percent of small business owners do this.
Take advantage of every tax benefit available to your business. If not doing so, it’s a disservice to your business. Write-offs and deductions reduce your taxable income and therefore reduce the amount you pay the government.
Based on the success of many other small businesses, adopting these habits will lead to better business results and more satisfaction with your career choice.
This article was first published on Entrepreneur.com by