Financial Advice For Small Businesses – When you own a business, you know the risks and the opportunities. Compared to many people, you are willing to take more personal and financial risks to achieve more personal and financial opportunities. It’s a trade-off that can pay off big. However, even with a successful business, there is a good chance that you (along with most Canadians) will experience a lifestyle downturn at some point in the future. It probably happens when you have to pay for your children’s college education, when you retire, or because of something unexpected like an accident or illness. Financial planning is required to protect yourself from this risk, but good planning has traditionally been reserved for the richest of the rich. This article is meant to help and point you in the right direction. How much do you like squid? Imagine if one of the things you enjoy most about your lifestyle is regular vacations in Greece. You love the fresh seafood, the salty sea, and the warm night air, and you return there every few years. If this is the case, you may want to rethink your financial plan to ensure you continue to enjoy the same frequency and quality of dining and lodging on vacation now and in the future. In fact, tying your schedule to the things you support—whether it’s travel, spending time with family and friends, or hobbies and interests—makes real sense and makes the effort seem worthwhile. How Your Plan Works Planswell has created over 80,000 free financial plans for Canadians, including business owners of all types. One thing they have in common is the lifestyle they want to maintain or develop while working and in retirement. Here are the three main areas of your financial plan, including special considerations we often see for business owners: 1. Your borrowing. How much of your monthly cash flow goes to debt? Can debt be made cheaper? If so, how can monthly savings be reallocated to wealth growth and protection? For business owners: In addition to personal debts, you may have debts related to your business. The good thing about these debts is that the interest is usually tax deductible. Your financial plan should aim to maximize this opportunity. 2. Your investment. How much money will you need in the future? How much do you need to invest per month to reach it? What types of investment accounts give you the maximum after-tax income when you need to spend? For business owners: Your income may not be as steady and predictable as the average employee, which can make saving difficult. Additionally, if your business is higher risk, you may want to consider an RRSP, TFSA, or other investment accounts to reduce risk. 3. Your Protection. What type and amount of insurance is necessary so that even if an accident, illness or death occurs in your household, the negative financial impact on you and/or your family is minimal? For business owners: You don’t get workplace insurance benefits, but you do get a great alternative: a health spending account (HSA), which allows you to use pre-tax money to pay for medical expenses. Another unique concept for business owners is company-owned life insurance. If you have cash or an investment in a company that you won’t need to withdraw anytime soon, this strategy can allow you to access those funds in a very tax-efficient way. The plan optimizes these areas and tells you exactly what you need to do each month to reach your goals. When you retire, your plan will determine how much money you withdraw and the resources you use to maintain your lifestyle among the ancient columns and olive groves of beautiful Greece. How Your Plan Fits You What happens if you create your plan today and your business doubles next year? Or if the stock market falls, you get married, have children, or decide to downsize the empty nest? In fact, life always brings changes and your schedule must change with it. The solution is to update the plan every six months. That way, if your business is booming, your plan will adjust to maintain a higher standard of living. If the market has made significant moves, your investments will be recalibrated. If there is a change in your marital status or living circumstances, this will also be included in your plan. Once upon a time, when financial planning was only done by well-paid people, it was completely impractical to update your plan frequently. In fact, of the small number of people who actually have a financial plan, most do it only once in their lives and hope for the best. Today, Planswell lets you update your plan in seconds, whenever you want. What are you doing in the next three minutes? An investment in your business. Build a family. Buying an apartment and a car. There are many high notes in life, but behind all of them is the fundamental desire to never lose the ability to continue enjoying the sweet Mediterranean bouzouki music. If you share this basic desire, we think creating a free plan with Planswell is the best thing you can do in the next three minutes. Increase your wealth. Manage your credit. Protect your assets. Planswell gives you a free package that combines investments, insurance and mortgages so you can protect your lifestyle during work and retirement. High medical costs? See How to Get Affordable Coverage Through a Health Spending Account Related Reading: Small Business Succession Planning
Are you a registered business owner without employees? Learn how you can use a medical expense account to pay your medical expenses through your company:
Financial Advice For Small Businesses
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Ontario Supporting Small Businesses With Financial Advice And Training
However, effective bookkeeping is not an easy task – especially if finance is not your primary background. Bookkeeping for a successful small business requires a lot of organization and skill. From preparing a profit and loss statement to preparing for tax season, accounting is more than just tracking cash flow. We dive into ten best practices for successful accounting for small businesses.
Whether tracking numbers is your forte or barely keeping your bank account in the green, organization is key to effective small business bookkeeping. Small businesses usually have multiple accounts to keep track of and things can get confusing quickly. Minimize the amount of real estate your ledgers take up by moving to a single repository to manage your business accounts.
Most invoices (and probably your own) are billed to clients online, making it easier to track accounts payable and receivable than the old days of double-entry bookkeeping with pen and paper.
A single cloud-based system where you can get an overview of all your bank accounts and balances – and access them from anywhere – is not only the way of the future, but practically a necessity for small businesses. This simple step can save you a lot of time looking for certain transactions in your books, and even make budgeting decisions easier when you have all the numbers in front of you. Successful small business accounting requires accuracy and serious organization—so set yourself (and your business) up for success with the right tools to help you stay on top of your finances.
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It’s easy to blur the lines between what’s yours and what’s business when you’re running your own company. But keeping business and personal expenses separate is essential to managing your finances accurately.
Keeping your personal bank account separate from your business bank account can help keep the numbers in balance and help make sure it’s really right for you
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