Smart Financial Tips for New Retail Business Owners
Starting a new retail business is an exciting proposition, but it also comes with its own unique perils. Not only are there the day-to-day responsibilities of managing employees, growing your customer base and keeping the lights on, but there are also behind-the-scenes bookkeeping complications that prevent many businesses from ever getting off the ground. In fact, most small businesses tend to fail not because of a bad idea, but because the owners didn’t fully grasp the accounting side of their operation ahead of time.
A little pre-planning goes a long way, so here are four tips for securing your business’s finances well in advance of the grand opening.
Small businesses are all about the possibility of future growth, and you don’t have to realize your entire vision on day one. Rent the smallest, least expensive office or storefront you can find. This lowers your overhead and gives you more freedom to take risks with your business model. If your idea and product are good, no one will mind buying it in a cramped, simple space. Remember, in the first few years, you want to expend as much creative energy as you can while spending as little money as possible.
The fancy storefront and huge office space can wait. People will shop with you because of your brand, not your fancy store. How many "hole-in-the-wall" places do you eat each month and love it?
Settle Debts Ahead of Schedule
If your electric bill is due on the 15th, pay it on the 10th. You want your credit to be in good standing, and one late payment can be the snowball triggering an avalanche of past due notices. This is especially important when dealing with suppliers with whom you need to maintain a consistent, long-lasting and mutually beneficial working relationship. The best way to do this is by paying your bills before the due date. Getting into the habit early is going to pay dividends in the long run.
Protect Yourself From Fraud
New retail business owners are increasingly susceptible to tax-related fraud. In the months leading up to the opening, new business owners hand over a lot of personal information to many different banks, contractors, and suppliers, increasing the risk of that information ending up in the wrong hands. Per Lifelock, the majority of business-related fraud results from illegally attained Employee Identification Numbers, which are then used to file bogus W-2 forms. If this occurs, the IRS will place the burden of proof on you to prove that a fraud has occurred.
Develop an organized system for storing and protecting all employment records and keep a running log of who accesses this information and when.
Guard Your Personal Assets
As a small business owner, you are liable not only for your personal debts but also for your company's cumulative debts. Any judgments or liens filed against the business could potentially place your personal assets at risk as well —especially if the business isn’t yet turning a profit. Business liability insurance can protect you against certain kinds of lawsuits, but you should also consider incorporating as an LLC to place an additional barrier between your business accounts and your personal ones.
At the end of the day, you will always be responsible for your debts, but you should protect your personal assets as much as possible.