Money Management Tips for Business Owners

Bankruptcy Lawyer

Every business owner, from the “Mom & Pop” restaurant to the Franchise Owner has to wear many “hats”.  The most important “hat” to wear is that of the Chief Financial Officer.  Even if you are just a sole proprietor, you have to keep your finances in order.  I previously wrote about my top 5 tips for small business owners.  Here are 5 more tips, from

I’ll start with the one that overlaps with what I wrote. Don’t forget about taxes. That should be first on every business owner’s list.  The author suggests setting up a separate bank account just for taxes, and setting the money aside each month.  That is a great idea, and it takes discipline as a small business owner to do that, but it will pay off in the end.  For two reasons.  First, because you won’t have to scramble to come up with the money each quarter.  And, second, to avoid the problems I see if a business owner ignores the income taxes owed.  You might not feel the impact of the IRS, or the State Taxing Authority for months or years, but when you do, they will crush you and your business.  They can freeze all of your bank accounts, cancel licenses, and shut down your business.  They can also put liens on your personal assets, such as your home, car and personal belongings.

And, I’ll add that,  if you have employees, pay your withholding taxes.  Because those are  “trust fund taxes”, you can never eliminate those in any type of bankruptcy, and they will follow you forever.


“Don’t Borrow What You Don’t Need”.  This refers to the fact that many businesses have to borrow money to manage their cash flow.  But this money borrowed should be under control.  So, it should be used wisely.  Use it to open or expand the business.  But, you should  use it sparingly when it comes to filling the gap between your gross sales and your expenses.  If you see that you are tapping into your line of credit every month, and that business just isn’t covering the overhead, that’s a sign to change things in your business.  If you don’t change, by lowering overhead, or in some other way, by finding ways to grow your sales, you will be digging yourself into an ever-deeper hole.  If you start using your personal retirement funds, or personal credit cards to keep your business going, those are signs that you need to seriously re-examine your business, and make some serious changes.  The article refers to getting your payments faster, by accepting easier payment methods such as mobile payments, or online ordering.  Those can help, but if your business is not generating enough to cover the expenses at all, and your credit line is ever-increasing, you should look at your overall numbers and reexamine them.

“Set  the Tone For Payment Expectations”. This applies more to service-oriented business.  You can set up monthly payments for services, or down-payment and completion payments for construction-type jobs.   Most importantly, you need to communicate clearly, and in writing, exactly how you expect to be paid.  And, make it easy.  It may be as simple as handing your customer payment envelopes, or sending monthly bills.

“Make Your Invoicing Cost-Effective” However you bill your customer, it should be easy to do, and easy to monitor.  And, to go along with the last point, the customer should know what to expect.

“Analyze Where You Invest Your Time”.  This is often overlooked. It is easy to forget, as a business owner, that you are the “Chief, Cook, and Bottle Washer”. The small business owner wears so many “hats” , that it is easy to get caught up in the day-to-day routine of running the business and working in the business, that you might forget to see what is actually productive.  Would it help if you hired someone else to do one small job, to free you, as the business owner, to bring in more business, or to work on marketing, or to network with friends and colleagues to generate  more business? These are all important questions to ask, and analyze.  You might be the mouse running on a  wheel, but never getting the cheese, because sometimes, you need to just get off of the wheel to see where you are going.

As a bankruptcy lawyer, I help business owners find ways to protect their assets, keep their business running, and consult to help turn their businesses and their lives around.  Sometimes, it is too late to turn a business around, but sometimes, a person can reorganize a business, and their own life, to protect what they have.

Daniel J. Winter