The following is a guest post by Nicole Taylor of Home Business Online Opportunities.
The best home businesses will fail without proper financial practices. If you do not manage your home business finances appropriately, you may find yourself sinking before you ever have a chance to fly. If you want to give your home business the best chance of success, you are going to want to follow some sound financial advice.
When your hard work starts to pay off, money is going to start rolling in. What you do with that money will play a critical part in what is going to happen to your home business. You need to put at least ten percent of the revenue generated by your home business back into the business, and many times successful home business owners put half of the home business revenue back into their home business budgets. If you do not put some of your home business revenue back into the business, your home business is not going to flourish and it will eventually fail.
While reinvesting revenue into your home business is crucial, it is not the only important matter when it comes to home business financial concerns. Practicing proper bookkeeping methods is also critical. If you do not keep the books in an organized manner, you are not going to be able to track your finances and you are definitely going to run into trouble should you ever be audited. If you do not know anything about home business bookkeeping, do yourself a favor and either take some classes or hire a bookkeeper to keep your books for you.
Speaking of bookkeeping and being audited, taxes are another thing you really need to pay attention to. Whether your home business is making ten thousand a year or ten million a year, you are going to have to pay taxes. If your home business is a sole proprietorship, doing your own taxes should not be too complicated. However, if you have incorporated your home business or turned it into an LLC, you are going to want to hire an accountant to do your taxes. Accountants do not cost nearly as much as you would pay in fines and penalties if you do not pay your taxes properly.
When your home business becomes your sole means of income, you need to plan for downtime. Experts suggest that everyone have six months of expenses put aside in case of an emergency. What if you become injured or ill and your home business can not bring in money during that time? You will need a cushion to fall back on. Put ten percent of your net profits into a savings account so you will be prepared for any unpleasant surprises.
Of all of the financial advice you will be given, this may very well be the most important. When you are operating a home business, it is essential that you manage your cash properly. By cash management I do not mean accounting or bookkeeping, I mean proper spending and proper invoice management.
You should never spend more than you have to on any of your home business expenses. While it may be convenient to run to the local office supply store for printer ink, you can get it a lot cheaper online. Anytime you buy anything for your home business, make sure you are getting the best value and your dollar will stretch a lot further.
When it comes to invoice management, you are going to have to be tough. If your home business is one where clients and customers pay you ahead of time, you will not have a problem. However, if clients pay you after you have provided a service, there are some rules you are going to want to implement into your home business practices. You will probably want to require a deposit for any services you are going to be providing and you should implement late charges on any invoices that are paid late. Your home business is what pays your bills, and if you are not getting paid like you should be you are going to run into trouble.
By following these tidbits of financial advice, you will be able to avoid a lot of home business headaches and will be able to ensure the successful growth of your home business.
Photo by Â©hris.