3 Money Management Rules Home-Based Business Owners Need to Know

If your morning commute consists of the stroll from your bed to your desk, you might be a home-based business. And there are lots more like yours! More than half of firms in Illinois without employees are operated out of someone’s home. Until recently, most were in construction, information services, and scientific or technical sectors. While those areas may be changing, one thing has stayed the same: the need to manage your money wisely.

Whether you’re just getting started or need a refresher, keep three fundamentals in mind to save time and avoid bumpy financial roads ahead.

Rule #1: You Need a System to Track Income & Expenses That Works for You

It’s hard to manage what you don’t consciously measure. You need a system that will quickly show you where your money comes from and where it goes. For one thing, this helps you know how successful you are. Plus, you will want to know what expenses to cut because they are sucking away your funding.

Most of all, you will be grateful at tax time that you don’t have to go digging through emails and files to get the information you need.

What we recommend:

• Hold on to work-related receipts and documentation. Having an organized filing system will come in handy at tax time.
• Spreadsheets and tools like QuickBooks and Wave are your friends! Don’t rely on your memory to track your dollars.
• Create categories for transactions – such as transportation, client meetings, office supplies and so forth. Then revisit those categories regularly and adjust them as your needs change.

Whatever the system is, it’s gotta work for you. Why waste your time buying expensive software and setting up some fancy system if you’re not really going to use it? Sometimes simple is better. It just needs to track every dollar, be easy to adjust, and make sense to you.

Rule #2: Mixing Personal & Business Finances Makes Everything Harder

You know what they say about mixing business with pleasure. Nowhere is the saying more apt than when it comes to your wallet. Keep every penny in separate accounts so it’s always clear where your cash is being spent. Intermingling money is a recipe for confusion, tax headaches, and inaccurate reporting. And the longer you do it, the harder it becomes to resolve.

What we recommend:

• Look into different types of online accounts so don’t agree to something with too many fees or high interest rates.
• For example, use business check cashing for work payments and a prepaid debit account when shopping for yourself.
• Pay yourself from your business account and track your own salary.

Rule #3: You May Need to Pay Taxes Quarterly

Many small businesses pay quarterly taxes since they aren’t automatically withheld from paychecks. To avoid surprises, talk to an accountant about estimating what yours should be and paying an accurate amount each quarter. When getting started, you may need to set aside twenty to thirty percent of your income for taxes, but that figure depends on how much you expect to make.

If you’re not prepared, you could get hit with an unexpected bill at tax time or penalties for underpaying the IRS.

What we recommend:

• Set aside a certain percentage of your income for taxes.
• Prepare to make estimated quarterly tax payments on the 15th of January, April, June and September.
• Get more details about how to manage your finances from a tax pro who knows the ins and outs of small, home-based businesses.

Let Illinois Currency Exchanges Help You Manage Your Finances

There are many other things to know – like how to protect your money and your identity from fraud, including check fraud. CCEA Currency Exchanges throughout the region have a whole lot of other smart tips on handling your money that you can check out.

Read about our many financial and auto services online, or get in touch with your local CCEA and find out what else we can do for your today!