What To Know Before Starting a Business (MNP 3 Minute Debt Break)

2021-10-18

schedule3 minute read

Lifestyle Debt

Debt Solutions

3 Minute Debt Break podcast

Starting a new business is a great adventure. And since you’re running the show, it’s on you to make multiple decisions every day, especially the challenging financial ones. When you’re first starting out, money decisions can have huge impacts on your business now and into the future. 

person reviewing graphs on their phone
Co-mingling your business and personal finances is a trap masquerading as convenience. It makes it difficult to distinguish business from personal expenses, let alone track what’s coming in and what’s going out. Save yourself the confusion and open a separate business account. Deposit all business capital into and pay all business expenses from this account. If you plan on using credit, apply for a business credit card or line of credit account. To pay yourself – whether as an employee or a proprietor – transfer the appropriate amounts to your personal account and use these funds for personal expenses only.

At first this will take more effort and forethought, but separating your finances will simplify your record keeping. Your bookkeeper or accountant will thank you. And you’ll appreciate how much easier it is to determine business expenses and allowable write offs come tax time.

Speaking of write offs, many owners risk their financial stability by spending on extras, in some cases even paying a premium, believing they can claim these expenses and increase their tax refund at the end of the year. But this is a risky gamble. Tax write-offs are complex and often highly specific. More importantly, not every business expense is a write-off.

Another pitfall to be aware of is credit. Too many new business owners gain access to large amounts of credit without a plan to keep it under control. This leads to the temptation to use more credit than planned or necessary.

You need to be honest with yourself about your spending. If you need credit to manage your costs, you should seriously consider either cutting expenses or bringing in more income. Better yet, do both. Keep your credit use manageable so you can focus on growing your business, not playing catch up on months old debts.

But, ultimately, debt can happen. And it can happen faster than you think when you’re running a business. But no matter your situation, there are always solutions – some can even eliminate your debt without having to close your hard-built operation. Contact MNP Debt for a Free Confidential Consultation today to learn your options. During this no-obligation initial meeting, MNP will review your financial situation, challenges and goals to assist you with defeating your debt for good.

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