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Many solo entrepreneurs and freelancers keep their personal and professional finances combined when they first start out. Any paycheck goes right into their personal bank accounts, and any expenses are charged to their personal credit cards. 

In the beginning, this is understandable. You might not know if your business is going to succeed—or you might start your business as a side hustle, so you don’t think you need a lot of infrastructure. 

However, as soon as your business is established, it’s important to separate your business and professional accounts. Here are a few reasons why—and how to do it. 

You Can File Your Taxes More Easily

Your business can deduct a variety of expenses throughout the year, but you need to keep track of these costs and ensure that they’re separate from your personal accounts. An easy way to do this: open a dedicated business account. You can charge expenses to a business credit card or write out checks that pull from your professional funds.

Once tax season comes along, you won’t have to remember what professional expenses you had. You can simply download your transactions from this account and determine which costs are tax-deductible. This simplifies and speeds up the process. 

You Can Create a Cushion to Keep Paying Yourself

Many freelancers or sole proprietors use their business bank accounts to stabilize their income throughout the year. They deposit all of their income into the business bank account and then withdraw a flat salary each month. 

For example, a contractor might make $7,000 in January and $3,000 in February. By pulling a flat salary, he can afford to pay himself $5,000 monthly (or $4,500 monthly with a cushion saved for later). 

Some people enjoy the stability of knowing they’ll get paid the same amount no matter what they earn. If the business account starts to get too big, these freelancers can award themselves end-of-quarter or end-of-year bonuses and enjoy the extra cash. 

You Can Budget Better

Not only can you enjoy a flat salary with separate personal and professional accounts, but you can also budget your expenses. You can easily see which charges are related to your business and plan for fluctuations throughout the year. 

A common example of these kinds of expenses is professional software subscriptions. A business owner might use a software tool as part of their workflow and pay an annual fee to license it. If the cost of this service is charged each February, the business owner can budget for it and ensure they have enough funds in the bank to prevent overdraft fees. 

You Can Develop Business Credit

If your business begins to do well, you’ll likely want to scale—which will probably require additional funding. To secure this working capital, especially from a lender, you’ll want to have established business credit.

When your personal and business finances are intertwined, you make it difficult to identify your business income and expenses, which are used to assess your business credit. By separating the 2, you can paint a clear picture of the financial health of your business—making it easier to determine your likelihood of defaulting on a loan.

3 Steps to Separate Your Business and Personal Finances

There are multiple ways to prove that your personal and professional finances are separate from each other. Many of these steps are free or affordable for small business owners. 

1. Establish a limited liability corporation (LLC), S-corp, or C-corp. This will give you an employer identification number (EIN) from the IRS to separate your personal and professional business dealings. Most states charge application fees to operate LLCs and require annual reports and payments to stay in operation. Learn what your state charges and budget for it. 
2. Open a business checking account. Once you have your corporation established and EIN generated, you can visit your bank or credit union to open a business checking account. If you already have an existing relationship with the bank, they may be able to waive any opening fees or monthly charges to operate the account. Some banks, however, set limits for how much you need to keep in the account to stay active and above the fee limit.  
3. Take out a business credit card. While you’re at the bank, ask about opening a business credit card attached to the account—some banks offer this as a perk for opening an account with them. You’ll only use this card for business purposes in order to keep your professional and personal costs completely separate. As an alternative for getting your bank’s credit card, look into business cards that offer competitive rewards systems, like cash back or airline miles.  

Once you have your business credit card, you can start to build up your business credit score. This shows that your business can stick to a budget and repay its liabilities in a timely manner.

As mentioned above, most lenders look at business credit when issuing loans, so you may qualify for more favorable terms if you take the time to build up your credit when just starting out. If you lack business credit, then lenders might look at your personal credit scores as well to determine how risky it is to loan money to you. 

Like personal credit, it takes time to build up business credit, so the earlier you start, the better.  

Take Steps to Separate Your Personal and Professional Finances

Even if your business is brand-new, there are steps you can take to keep your personal and professional accounts separate. Start with good documentation and budgeting and then establish a specific bank account and credit process for your business. 

Finally, look into bookkeeping software to invoice customers and record income as it comes in. At Lendio, we offer a free self-service tool for small business owners. This is a great place to set up your ledgers and prepare your business for growth.

The IRS distinguishes different business entities (or statuses) for companies of various sizes and types. The smallest of these entities is the sole proprietorship or a company that is only run by a single person. Learn more about sole proprietorship by reading below.

What Constitutes a Sole Proprietorship? 

A sole proprietorship refers to a person who earns money throughout the year that doesn’t come from investments or income from working at a traditional company. Sole proprietors can also call themselves solopreneurs, self-employed individuals, contractors, and freelancers. 

Do You Have to Fill Out Paperwork to Become a Sole Proprietor?

No. Anyone can start a business as a sole proprietor without registering with the state they live in. However, this does not exempt them from other licensing and education requirements to operate the business. For example, a hairstylist could work as a sole proprietor but would still need a license to cut hair in the state. 

How Do Sole Proprietors Pay Taxes?  

Traditional employers take out a portion of your income to cover federal taxes like Medicare and Social Security. The employee pays half of the required amount, and the employer covers the second half. However, sole proprietors need to pay their taxes on their own. They can directly pay the IRS through quarterly estimated taxes by writing a check or paying online. 

Sole proprietors are responsible for paying both the employer and employee side of federal taxes. However, they can then deduct this income from their taxes when they file each year. 

What Are the Risks of Sole Proprietorship?

There are a few risks with opting for a sole proprietorship over an LLC (limited liability company). The main risk is that your personal and professional accounts can be linked. 

This means if a customer or vendor sues you, they can go after your personal assets like your home and car. An LLC can protect you, but you need to apply for the status and pay annual fees to your state.  

What Are the Benefits of a Sole Proprietorship?

Sole proprietorships are one of the most flexible business entity options out there. You do not have to file paperwork to become an LLC, and you don’t have to answer to shareholders and other owners like a corporation or partnership. Furthermore, all of the profits are yours. 

However, all of the risks and decisions also fall on you. You will need to secure funding, acquire clients, and do the work (except for outside contractors that you work with). If this burden seems too much, consider forming a partnership with another person instead. 

Start Your Business With Organized Books

If you have an exciting business idea, consider becoming a sole proprietor where you can take on a few customers and grow your brand over time. Starting as a sole proprietor can help you decide how to develop your career. 

In the meantime, check out the free tools offered by Lendio to better organize your invoices, expenses, and other ledger items for good bookkeeping within your business.

Documenting your business’s financial status is a fundamental part of running a business, even if it isn’t the most enjoyable. There are a few documents that nearly all businesses, from a beginning freelancer to a Fortune 500 company, should regularly update and study.

Banks, investors, and other lenders will usually require 3 financial documents in making funding decisions: the profit and loss statement, the balance sheet, and the cash flow statement. These 3 data sets are not only the standard reports for rating a company’s financial health externally—they’re also essential for small business owners to truly understand how your company is faring internally.  

1. The Profit and Loss Statement

The business press and investors always eagerly await P&L statements from publicly traded companies because the information is clear, easy to digest, and hard to spin. Similarly, the quick hit of data provided by a P&L statement is incredibly useful for understanding the financials of your company at the moment.

“Small business owners should look at this report at least monthly,” suggests Eric Rosenberg of Due. “It is also a good idea to look at trends, comparing current results to the same period in the prior year and comparing the most recent month with the last few months. This should tell you what’s working well, what isn’t, and help you to focus on the most profitable parts of the business.”

P&L statements are most useful when you can put them into context—this way, you can see how your business is performing over time.

2. The Balance Sheet

There are 3 main components to a balance sheet: assets, liabilities, and shareholders’ equity, also called owners’ equity.

“It shows what your small business owns, owes, and what shareholders have invested in your small business,” Elizabeth Macauley notes in The Hartford’s Small Biz Ahead blog. “This math serves as the foundation of your balance sheet.”

Your assets should equal your liabilities plus owners’ equity. Assets include cash in your bank account, inventory, and real estate, while liabilities most commonly include debts. The owners’ equity equals assets minus liabilities.

“Every balance sheet should balance,” Macauley continues. “You’ll know your sheet is balanced when your equation shows your total assets as being equal to your total liabilities plus shareholders’ equity. If these are not equal, you will want to go through all your numbers again.”

Your balance equation should always be equal if you are doing the math correctly. If your company’s liabilities overwhelm your assets, your owners’ equity can be negative.

3. The Cash Flow Statement

“Cash flow statements are used to evaluate the financial health of a business as well as to provide a full picture of how it spends and invests the money it already has,” Mona Bushnell explained at Business.com.

This statement helps you to understand your cash flow, which is often the lifeblood of any small business—especially new ones. Cash flow is critical, as it dictates how much money you have on hand to cover expenses. If you’re frequently running out of cash due to customers paying late or financial mismanagement, you could soon face a brutal cash crunch.  

4. Accounts Receivable and Accounts Payable Aging Reports

“An aging report is used to show the outstanding customer invoices and the number of days they’ve been outstanding,” the Corporate Finance Institute notes.

On the opposite end, an accounts payable aging report shows what invoices you need to pay and how much time you have left to pay them. Alongside your cash flow statement, you can see how your expenses should be paid over time. 

Accumulated depreciation refers to the total amount of depreciation expenses related to your business. Your business likely has multiple assets that appreciate or depreciate over time. By tracking changes in the value of your assets, you can get a clear view of what your business is worth. Here are a few common questions about accumulated depreciation. 

What Are Some Examples of Depreciating Assets? 

For example, if a restaurant buys a couch for customers to sit on, it will start to depreciate in value as soon as someone sits on it. Stains from spilled food, wear from people sitting on it, and general interior design trend shifts will decrease its resale value. This is no different from the couch in your living room at home. 

Conversely, some assets may increase in value, or appreciate. The most common example of this is real estate. A business might buy a property and pay it off over a decade then significantly profit from selling the space because the land value appreciated. 

What Type of Account Is Accumulated Depreciation?

For example, if you spend $30,000 on a delivery van, you would record that amount under “fleet” in your balance sheet. After a year, the depreciation might be $2,000, meaning the true value of your fleet asset is only $28,000. 

Why Should You Track Depreciation?

Can You Control the Depreciation in Your Assets? 

How Can You Track Deprecation?

Some companies set up formulas for asset tracking. For example, they might reduce an asset’s value by 10% during the first month (because the item is no longer new) and then subtract a percent of the value each quarter. This makes researching accumulated depreciation easier, but it means it’s not always accurate. 

As a business owner, you want your accounting statements to be as accurate as possible to help you make sound financial decisions. Use a tool like Lendio's software to track your expenses and invoices to get a clear view of your company’s finances.

The first thing to know about subsidiary companies is that they can offer tax advantages. In this rocky business environment where financial strain has forced more than a few small businesses to permanently close their doors, any positive tax news should be greeted with open arms.

But before we get into those details, let’s back up and look at what defines these companies. A subsidiary is a company that belongs to a separate company that controls more than half of the subsidiary’s stock. The company holding the controlling interest is known as the parent company (aka the holding company).

Basically, if more than half of your company’s equity is controlled by a separate company, you are likely a subsidiary. In this arrangement, the parent company plays a key role. They help elect the board of directors for the subsidiary and can exert influence on multiple aspects of the business operations.

“Subsidiaries are common in some industries, particularly real estate,” explains a report from The Balance Small Business. “A company that owns real estate and has several properties with apartments for rent may form an overall holding company, with each property as a subsidiary. The rationale for doing this is to protect the assets of the various properties from each other's liabilities. For example, if Company A owns Companies B, C, and D (each a property) and Company D is sued, the other companies can not be held liable for the actions of Company D.”

Now let’s look at some of the tax implications for subsidiaries. Because a subsidiary is a separate legal entity, it must often do all the things that a normal business would. This includes maintaining financial records, recording all liabilities and assets, filing tax returns, and paying income taxes. This level of independence is noteworthy because it opens the door for financial benefits for the parent company. For example, if a parent company in Canada owns a subsidiary based in Germany, the subsidiary might pay taxes on its profits according to the laws of Germany rather than lumping its financials together with the parent company and paying in Canada. This dynamic can often provide tax benefits for the parent company.

Similar tax savings might also be available at the state level. For example, let’s say a parent company in California wanted to use a new trademark. If the trademark taxes were particularly high in the Golden State, the company might create a subsidiary in Wyoming in order to take advantage of that state’s more favorable tax rates.

This is not to say that the financials of subsidiaries and their parent companies are completely separate. There are times when a parent company will consolidate things in order to save money.

“However, many public companies file consolidated financial statements, including the balance sheet and income statement, showing the parent and all subsidiaries combined,” says The Balance Small Business. “And if a parent company owns 80% or more of shares and voting rights for its subsidiaries, it can submit a consolidated income tax return that can take advantage of offsetting the profits of one subsidiary with losses from another. Each subsidiary must consent to being included in this consolidated tax return by filing IRS Form 1122.4.”

While this type of consolidation can be a shrewd approach for a parent company to offset losses among its subsidiaries, special rules apply. Tax returns and financial statements from multiple subsidiaries can only be merged when the parent company owns 80% or more of each of the companies in question. And the parent company would need to notify the IRS in advance of the plan to consolidate tax returns.

As you can imagine, it’s complex and burdensome to manage the accounting for multiple companies. Add in the tax element and things get even more difficult. For this reason, the owners of parent companies and subsidiaries should always invest in the services of a reliable and trusted accountant. Additionally, they should consult with attorneys in order to understand and adhere to all relevant laws.

It’s understandable that some business owners might balk at the idea of paying for accounting and legal help. After all, the price tag is never cheap for quality advice. But it’s a wise investment that will help them maximize the unique financial benefits of their business structure. Failing to do this would be like owning a high-performance sports car but never learning how to shift into its 2 fastest gears.

Subsidiary corporations also need to ensure that their day-to-day bookkeeping is consistent and accurate. It’s a best practice to use bookkeeping software that can automate recurring tasks and help to ensure tax compliance. This proactive approach to your finances will save you time, hassles, and money.

The information provided in this post does not, and is not intended to, constitute tax advice; instead, all information, content, and materials available in this post are for general informational purposes only. Readers of this post should contact their tax professional to obtain advice with respect to any particular tax matter.

“Inflation” is one of those economic terms Americans hear about from childhood onwards—but if quizzed on its exact definition, many might have a hard time coming up with the correct answer.

Most often, we probably think of inflation as the reason why goods cost more and wages are higher today than in the past. For example, you could buy a glass of beer for a nickel in the late 1800s, and the federal minimum wage in 1980 was just $3.10 per hour.

Inflation is also usually the answer to why the government can’t just print out more cash and simply hand it to everyone who wants some.

But to understand how inflation works and how it can impact your small business, it’s critical to look at the concept from several angles. Wages, supply, demand, and monetary supply all play a role in inflation.

“Inflation can be defined as the overall general upward price movement of goods and services in an economy,” according to the Department of Labor.

This upward trend is generally caused by 1 of 2 reasons: cost and demand.

Cost-push inflation is caused by the rising cost of producing goods and services. If the cost of labor, land, or raw materials go up, businesses will usually increase prices to maintain their profit margins.

Natural disasters provide an extreme example of cost-push inflation. If production facilities are severely damaged, prices go up because production becomes more expensive.

On the other hand, demand-pull inflation is caused by an increase in demand. If demand exceeds production, inflation will likely occur because prices will rise.

While it’s not wise to overgeneralize economic trends, demand-pull inflation is sometimes thought of as “good” because it typically happens in an expanding economy with low unemployment.

When the national money supply, which includes cash as well as credit and loans, is overextended, a type of demand-pull inflation occurs. If there is too much money being produced for not enough goods, the price of goods will increase. This situation also lowers the value of the overproduced currency in comparison with other global currencies, causing import costs to rise and, in turn, causing overall prices to increase.

Overproduction of the money supply, in some cases, can lead to the extreme devaluing of currency. Famously, hyperinflation occurred in Germany following World War I and in Venezuela during the 2010s.

Because small businesses are less financially stable by their very nature, inflation has an outsized impact on smaller companies. Increasing your prices by just a few dollars can make you far less competitive. As a small business, your profit margins are likely very tight anyway.

Unfortunately, when it comes to macroeconomic forces like inflation, there is not much you can really do except for plan. When doing your long-term financial forecasting, you should think about both demand-pull and cost-push scenarios.

If your cost of production rises year after year or demand starts to overwhelm your supply, how much can you raise prices and still stay competitive?

Financial statements are meant to provide insight into your business and help you to make informed, strategic decisions. With the data you collect and report, you can identify a host of problems, ranging from wasted spending to underperforming investments. 

However, a financial statement is only as good as the insight you can glean from it. If you aren’t sure how to read the reports, don’t update them regularly, or don’t take action on them, they won’t be valuable. 

If you’re new to financial reporting or have a hard time knowing what to look for, consider these 5 red flags in your financial statements.

1. A High Debt-to-Income Ratio

Business and personal accounting have 1 thing in common: you always want to make more than you spend. If your debt-to-equity ratio is on the rise, then you’re spending more than you’re bringing in—and unless you’re scaling and reinvesting in your business, that’s a major red flag.

Set a goal for a standard debt-to-income monthly ratio, with ranges for healthy high and low levels. This process will help you to sound an alarm if your ratio begins to rise—that way, you can intervene before your spending gets out of hand.

To rebalance your debt-to-income ratio, look for unexplained or unnecessary expenses. You can also acknowledge that some expenses are 1-time issues (like an unexpected plumbing repair cost at your business) that will return your ratio to normal in the following month. 

2. Lower Profit Margins

High sales totals don’t always indicate a successful business. A more reliable metric to look at is your profit margin. The profit margin is a metric that describes the amount of money (or percentage of profit) that a business makes from its sales. 

For example, let’s say you offer 2 products that both cost $20. If Product A costs $5 to make and Product B costs $15 to make, then Product A is significantly more profitable to your business. So even though these products are priced the same, their costs are different—which means they have different profitability (profit margin).

You can’t always control what your customers buy. However, you can create a diverse product offering and prioritize marketing your higher-margin items while continuing to focus on optimizing your company-wide profit margin. 

3. Excess Inventory

Inventory that you haven’t been able to sell is called dead stock. This term refers to items that get stuck on store shelves or in warehouses before they can get moved to the store or shipped to customers. 

Excess inventory means lower profits. First, you have to pay for warehouse space for the inventory that isn’t selling. Next, your shelves become full of unwanted items, which limits your ability to bring in new, highly desirable products. 

Even if you do sell your dead stock, you’re more likely to take a loss. Think about a collection of unfashionable sweaters that’s discounted 75% by May or the Christmas decorations that immediately go on clearance after December 25. At some point, you just want to get rid of the inventory and move on. 

If you consistently have problems moving your inventory, you may need to reconsider how much of a given item you buy or change your buying patterns to acquire more desirable items.  

4. A Large Account Receivables

When you send an invoice to a customer, it goes into your accounts receivables until those outstanding funds are collected. This is money you’ll have in the future but can’t use now. 

Watch to see if your accounts receivables build up—if they do, it could create cash flow problems in the future. Not only do you need to worry about customers not paying their bills (or taking too long to reconcile them), you also need to make sure you have enough operating cash to sustain your own liabilities and expenses. 

Like your debt-to-income ratio, set ranges for a healthy accounts receivable amount so you can intervene before the unpaid invoices become a problem.  

5. A Large Number of ‘Other’ Expenses

Within your financial records, you should keep most of your expenses categorized. You’ll likely have categories for materials, utilities, labor, marketing, and other costs. Unfortunately, not all of your business costs fall into these exact categories. 

Keep an eye out for a rise in “other” expenses that might fly under the radar but build up if you’re not careful. This is particularly relevant if your “other” expenses are large and contribute significantly to your debt-to-income ratio. 

You should look for ways to categorize these items and set budget items to avoid overspending.  

Many of the financial metrics above can change depending on the statement, time frame, or other variables you might use. If you notice any of the above red flags in your financial statement, it doesn’t mean the sky is falling—these are signals that should give you pause and lead you to investigate further, but they’re not completely damning.

For example, during the pandemic, you may have extended your net payment terms with clients. This flexibility with your customers could lead to an increase in accounts receivable—but within the context of the global pandemic, you can understand that it’s not indicative of a poorly run business.

The key to reading financial statements is to identify patterns and problems. If you can’t answer why these changes are happening, you need to take a closer look at your business. 

For better organization and financial planning, look into getting a software system that can help with bookkeeping. The Lendio app can help you organize expenses, sort invoices, and make accounting a breeze. 

Launching a brand-new business is an exciting experience. It's usually just you and a blossoming idea against the world. However, with so many unknowns, the beginning stages of a startup can be anxiety-filled and tricky.

Whether you like it or not, business success ultimately comes down to cash flow—is your business making more than it's spending? If the answer is yes, then you're on the right track. If the answer is no, then you need to start making some fixes.

In the early stages, you'll likely burn more cash than you're making—that's common. Nonetheless, you need to have a plan for how you're going to eventually turn a profit.

Running out of cash is the second biggest reason most startups fail. It's not that businesses don't get enough financing or sales—it's that they don't strategically and responsibly manage that capital.

Getting your financial ducks in a row is critical to the short-term and long-term survival of your business. The sooner you get your financial situation established, the better. Below, we'll cover the 10 critical financial steps you need to take to build a durable business foundation.

1. Establish Financial Goals

Everyone wants to build a multi-million dollar business, but you need to set realistic financial goals for how you're going to get there. Ask yourself a few questions to get your mind thinking of the possibilities—don’t worry, there are no right answers:

• Do you want to keep your business small forever, or would you like to eventually scale it to something bigger?
• Do you plan on owning this business for the long-term, or do you want to grow and then sell it for a quick buck?
• How much do you plan on paying yourself?
• How much revenue would you like your business to generate in the first year? What about the first 3 or 5 years?
• When would you like to start turning a profit?

You don't need to have answers to all these questions just yet, but keep them in the back of your mind as you build your business. Soon, you'll begin making important business decisions that may permanently steer your business in a specific direction—and it's essential you know where you're going.

2. Determine How You'll Fund Your Business

It takes money to make money, especially when you're just getting started. Initial investments in your business will require a significant sum of money. Real estate, renovations, website hosting, product molds, marketing material, software, payroll—operating a business isn't cheap.

To get your business off the ground, you'll likely need a healthy pile of cash. How you fund your business is just as important as what you spend your funds on. Here are a few financing sources for you to consider:

• Debt financing: Borrow money and repay it with interest. Maintain complete control of your business
• Venture capitalists: Trade equity for cash. Lose a portion of ownership of your business.
• Angels: Share ownership of your business with a wealthy individual in exchange for capital.
• Friends and family: Mixing personal and business life can get a bit thorny, but mom, dad, and your high school best buddy may be willing to lend you some cash without contracts and collateral.
• Crowdfunding: Harness the power of the internet to raise funds for your business in exchange for future products, rewards, acknowledgment, or good-Samaritan points. 
• Bootstrapping: Build your business from the ground up with only your personal savings and cash from initial sales.

Before you give away expensive equity or lock yourself into a 10-year loan, consider all your financing options. Take a look at our Top Financing Options for All Your Business Growth Needs guide for more details.

3. Separate Your Business and Personal Finances

While it might seem easier to just carry around one piece of plastic, it's not easier come tax time. Trying to remember which expenses were for your business and which were for your personal life can be a nightmare—especially 9–12 months later.

Right from the get-go, do everything you can to separate your business and personal finances:

1. Apply for an Employer Identification Number (EIN)
2. Set up your business entity type
3. Open a business bank account
4. Obtain a business credit card
5. Separate all your expenses

Separating your expenses doesn't just make tax season easier (though, that'd be reason enough)—it also can help you claim valuable tax deductions, shield your personal assets, and build your business credit.

The longer you wait, the harder it becomes to separate your finances. Set yourself up for success early to avoid major accounting headaches later.

4. Build an Emergency Fund

In the beginning, every dollar counts. Every sale, every saved expense, every penny-pinched—it all matters. However, it's never too early to start building your emergency fund.

Get into the habit of setting aside a portion of your weekly or monthly revenue toward a cash cushion. COVID-19 was a rude wakeup call for all businesses solely reliant on future cash flow—don't let an uncontrollable disaster destroy your business.

As a rule of thumb, try to save at least 3 months (or more) of liquid funds. These rainy-day funds could help you survive future calamities and unexpected expenses without having to wait around for government loan programs.

Another great way to build an emergency fund is to obtain a business line of credit. A business line of credit is a flexible form of financing that you can keep in your back pocket for downtimes—it's there when you need it, but you have no obligation to use it.

Whether you need to make immediate repairs to a vital piece of equipment, cover payroll during a slow month, or restock your inventory, a business line of credit can handle it all. The credit is revolving, so when you use it and repay the borrowed portion, you'll get immediate access to your full credit line again. Plus, you only pay interest on funds you use, not the full amount.

5. Get a Business Credit Card

You're going to start accruing expenses here and there even before opening day. Get a business credit card as soon as possible so that you can keep your personal and business expenses separate. 

Unlike other business loans, you don't need to wait to apply until you've been in business for 12 months or until you've sustained thousands of dollars in annual revenue. Lenders will look at your personal credit score, meaning you can qualify for a top-notch business credit card starting day one.

Business credit cards can give your new business a huge headstart:

• Use your card to pay for practically any business expense
• Start building your business credit score so that you can qualify for bigger loans down the road
• Enjoy a 0% introductory APR for the first 12 months with most cards
• Qualify for higher credit limits to pay for expensive equipment or other startup costs
• Earn points, rewards, cashback bonuses, and other great perks
• Automatically separate and track your expenses

6. Track and Monitor Your Expenses

You don't need to become an accounting wizard, but you need to learn a few bookkeeping basics. First, create an account on a free bookkeeping tool, like Lendio's software. Connect your bank accounts and credit cards, and voilà—Lendio's software will automatically begin importing, tracking, and categorizing all your income and expenses.

Data like this might not seem important now, but it'll be critical when you're applying for loans, forecasting your cash flow, and building your business plan. Plus, it'll make tax season a breeze.

Meticulous monitoring of your finances will also ensure no money slips through the cracks. Lendio's software can help you create, send, and automate your invoices, so you never forget about a delinquent customer. Plus, you'll always know where your money is going, so you'll never be surprised at your end-of-the-month numbers.

7. Strategically Set Your Prices

Pricing your products right is a Goldilocks conundrum. Too high, and you'll practically be marketing for your competitors. Too low, and you'll come off as a cheap brand. You'll need to find the sweet spot to outprice your competitors, maximize ROI, and maintain your brand integrity.

Setting your prices is hard on day one. Further down the road, you'll have more historical data, reliable break-even points, and research to help dictate your prices. In the beginning, however, you'll have to rely on forecasts, estimates, market trends, and (admittedly) a bit of guesswork.

To get baseline prices, you'll need to do some homework:

• Know your costs: Get down in the weeds with exactly how much it costs to source, produce, store, market, and deliver your products and services. Once you determine your costs, you'll know the absolute bottom limit to your pricing.
• Know your financial goals: Look back at the financial goals you established in Step 1. What price point do you need to set to make those goals a reality? 
• Know your competition: Analyze the market and see how your competitors are pricing complementary and substitute products and services. In this day and age, regardless of where your customer is, they can whip out their smartphone and get instant price comparisons—and research says they do it all the time.
• Know your market: How important is price to your customer demographic? For example, if you're selling breakfast cereal, some customers will fuss if your price is 15 cents more than a competitor. On the other hand, if you're selling Ford F-150s, your customer might not think twice that your truck costs $5,000 more than a leading competitor.

Once you've done your research, price your goods with confidence. Continually reevaluate your price point—it's never set in stone. Over time, you may build up operating efficiencies that dramatically decrease your costs, or your competitors may get caught up in a pricing war. Keep an eye on your sales, and don't be afraid to experiment with pricing changes.

8. Invest in Professional Services

When money is tight, you might be tempted to try and do everything on your own: bookkeeping, marketing, sales, recruiting, designing, and the list goes on. However, your most valuable asset is your time.

First, track how you spend your time. Record everything you do: answering emails, fly-by chit chats, scheduling, meetings, screening candidates, etc. Now, attach a dollar value to each of these activities—how much would you need to pay someone to do any of these tasks for you? Next, determine how much your time is worth—attach a dollar figure to it. 

If the value of an activity is less than your time is worth, outsource the task. Hand over the minutiae and start spending your time doing what nobody else can do for you—growing your business.

The most successful small business owners know when to do and when to delegate. Penny-pinching here and there could save you a buck or two, but you might be leaking more cash than you're saving. Consider which tasks you could easily hire a professional to do:

• Bookkeeping
• Web development
• Content marketing
• Copywriting
• Data entry
• Social media
• Customer service
• IT support

You can offload a lot of time-consuming activities to a freelancer or digital assistant. While learning new skills is valuable, it's not always the best use of your time as a small business owner to learn the ins and outs of WordPress or how to troubleshoot Mac issues. Start building a team (whether that's freelancers, employees, or other professional services) early on—you'll always have more than enough to do.

9. Remember to Pay Yourself

Don't forget that you're a business expense, too. Some entrepreneurs pour their heart, spirit, and bank accounts into their businesses at the expense of their families and livelihoods. 

You don't need to take home a big fat salary every month, but pay yourself enough to live comfortably (at least). Eliminating personal financial stress from your life will help you focus on your business and make more objective business decisions.

How you pay yourself will depend on your established business type. Owners of LLCs, partnerships, and sole proprietorships are viewed as self-employed, so they're paid through something called an owner's draw. If your business is a corporation (like a C-corps or S-corps), then you'll pay yourself through a set salary.

As the owner, it's easy to neglect yourself. Plan for this expense in advance so that you leave sufficient budget for your pay. Start a good habit from day one of always making yourself a priority—this practice will go a long way in the future business decisions (big and small) that you make.

10. Plan for Taxes

Your first tax season is right around the corner. Unfortunately, many small business owners forget to calculate their tax burdens when they're budgeting startup and operating costs. The reality is that your potential tax obligations could make the difference between profitability and financial loss.

As a full-time employee, your taxes are automatically deducted from your paycheck—no planning, no budgeting, no hassle. However, as a small business owner, you must take the initiative to calculate, set aside, and pay your taxes. 

The best way to avoid any future tax surprises is to pay quarterly taxes on your income. Doing this will give you a clearer picture of your month-to-month financial situation—plus, it'll make tax season much less of a headache.

Lendio makes it easy to prepare your company's taxes with a nifty feature called Lendio Tax Assist. Lendio Tax Assist is a free tool that helps you organize and estimate your taxes so you know how much money you'll owe in advance.

Sometimes taxes can be tricky, and that's why accountants are paid the big bucks. Still, they're almost always worth the cost. Consider hiring an accountant, especially for your first tax season. They'll save you time and money, as well as maintain your relationship with the IRS.

Let's Get Down to Business

Now that you've taken care of the essential financial steps, you're ready to start growing your business. Yes, these steps can be time-intensive, but they're well worth the initial investment—they'll pay dividends in time and money in the long run. With a solid financial foundation, you'll avoid many of the mistakes that kill new businesses. 

Remember, business success is rarely the result of spontaneity (especially for entrepreneurs). You need a plan—let us help. 

If you need capital to get your business off the ground, our personal funding managers can help make it happen. Just start your no-fee, no-obligation 15-minute application to see what small business loans you qualify for. Then, a funding manager will help walk you through your options so that you don't walk away with any ol' loan—you skip and hop away with the very best loan.

It takes a little cash to make big things happen. Get the capital your small business needs to start off on the right foot.