The business basics worth getting right early

When you’re figuring out how to run a small business, it’s impossible to get everything right. But some foundations get harder to fix if you leave them too long. Whether you run a startup, side hustle, or local business that’s outgrown an informal setup, putting these basics in place early will make your business easier to manage far into the future. These foundations are:

• Know your numbers
• Organize how the business runs
• Establish a clear business presence

Let’s take a closer look at each one.

Know your numbers

Figuring out how to organize business finances is more than just creating a budget or knowing how much is in your bank account. Focus on the following factors:

Separate business and personal money where appropriate

The US Small Business Administration (SBA) recommends opening a business bank account as soon as you start accepting or spending money as a business. If your business is a separate legal entity, such as a limited liability company (LLC), its money belongs to the business alone and should be kept separate from yours. Generally, sole proprietors are not required to have a separate business account, but having one from the start will simplify distinguishing business transactions from personal ones, which will make your life much easier, particularly when it comes to recording income and expenses. 

Record income and expenses consistently

Tracking financial transactions like sales, purchases, and expenses helps you see how your business is performing, such as which items are selling, and filing accurate tax returns down the line. Bookkeeping standards for businesses can differ depending on your jurisdiction, but in the US, the IRS says you can use any recordkeeping system suited to your business, as long as it clearly shows income and expenses. 

The bare minimum you need is to record every transaction in one place as it happens, whether that be a spreadsheet or accounting software. Include a date, amount, category, and any supporting documents like receipts or invoices. Recording as you go makes life easier come tax time, because if you can’t find the right receipts, you may not be able to claim certain expenses.

Understand the difference between revenue, expenses, and profit

Although you might appear to have a healthy bank balance, you need to remember some of that money might be owed in bills or taxes. It isn’t all profit. That’s why knowing the difference between revenue, expenses, and profit is essential to having an accurate view of your finances:

• Revenue – The money coming in from sales
• Expenses – What you spend to run the business
• Profit – The amount left after expenses are paid

The SBA recommends categorizing your expenses, including separating recurring costs from one-off ones. Knowing your recurring costs shows you what the business needs to bring in each month just to keep going. Recurring costs could include rent, software subscriptions, website hosting, and bookkeeping fees. Common one-off costs might be business registration fees, a laptop, or furniture. 

This knowledge will help you set prices that actually cover expenses, rather than finding out months later that they don’t.

Use basic financial information to make decisions 

Use your records to compare what came in with what went out to see whether the business actually made a profit, and check that everything matches your bank statement. Making this a habit early on will make it easier to spot problems like rising costs and unprofitable products or services down the line.

If you want to make a purchase, you can perform a cost-benefit analysis to weigh it against what it’s likely to bring in. The SBA gives an example of a restaurant considering outdoor seating that would bring in an expected $5,000 a year in extra profit. Upfront costs amount to $1,000 for an annual permit and $2,000 for the furniture. The cost-benefit analysis would show that the benefit outweighs the cost, which suggests the seats are worth adding. 

Organize how the business runs

If you need to do something repeatedly, establish a set way to do it each time. Creating processes that anyone can refer to is much easier while things are quieter than when your business starts to pick up, and you’re bringing more people on board. 

Handle inquiries and new customers the same way every time

If you have inquiries coming from various sources, like email, website contact forms, or social media messages, ensure they all land in one place, whether that’s an inbox, spreadsheet or CRM, so that nothing is forgotten. You should then create a rule for following up in a timely fashion, for example within one to three business days.

Make a checklist for what happens every time someone becomes a customer. This will vary depending on your business, but could include things like:

• Sending a welcome email
• Sending a contract
• Requesting a deposit
• Scheduling a delivery date

Establishing these early on means the process is already there when things get busier, and you don’t have time to create one from scratch.

Make invoices and payments predictable

Always use the same invoice template, including key details like your business information, an invoice number, the due date, what the customer is paying for, and how they need to pay. Set consistent payment terms, such as whether payments are due within 15 or 30 days, and when you will follow up on late payments. Many invoicing tools, like Wave and FreshBooks, include templates that allow you to set reminders for customers. 

Starting this way from your first invoice keeps your records easy to follow and means you won’t need to keep changing terms for existing customers. 

Organize records and track your deadlines

Setting up a process for business record keeping early is much easier than sorting through years of scattered files when you need a document at tax time. Ensure nothing is forgotten by having a reliable storage location for keeping records and a calendar for deadlines you don’t want to miss. Cloud storage is a great place to store documents like contracts, receipts, invoices, or licenses, as services often come with automatic backup, and they’re easy to share with an accountant if you ever need to. 

For deadlines, a calendar or to-do app is an easy way to keep track. Add one-off and recurring deadlines, like tax dates, renewals, payments, and set reminders so you have time to deal with them.

Manage access and passwords in one secure place

Safeguarding your accounts early on reduces the risk of breaches down the line.

A good place to start is passwords. A secure password manager is a much safer place to store passwords than a spreadsheet or notebook. This will also help you to have strong, unique passwords for every account without having to remember them all. 

Then turn on multi-factor authentication (MFA) for key accounts, such as your email, banking and domain. The US Cybersecurity and Infrastructure Security Agency calls MFA the most important step a business can take to secure its accounts, especially email.

Lastly, register all important accounts to an email that your business controls. Accounts tied to an old personal address, or to a freelancer who set them up, may be difficult to recover later on.

Establish a clear business presence

When someone encounters your business, you want them to instantly know what it is, what it does, and how to get in touch. Establishing a small business online presence early on will ensure the information they find is consistent wherever they find you. 

Create an online home for your business that you control

This means registering a relevant domain under an email you own, getting a matching business email, and creating a website. Registering the right domain early ensures you get the name you want and that nobody else can take it as long as you keep renewing it. Once your site is set up, verify that you own it in Google Search Console. This way, you can monitor how Google displays information about your site from the outset and spot any issues.

Make it easy to see what you do and how to reach you

Visitors who can’t quickly work out what you offer, or how to reach you, may choose a competitor instead. Write a clear description of your products and services, visibly display your contact details, and include an obvious way to take next steps, whether that’s inquiring, booking, or purchasing.

Claim your Google Business Profile (if eligible)

If your customers can visit a physical location or you make visits to them, you can claim your Business Profile and be found through Search and Google Maps. You can then edit your address, contact details, business type, and photos. 

Keep your details accurate and consistent 

Use your website’s information as a source of truth for creating other profiles across the Internet, so every channel you add later, like social media profiles, will have the same information. Because Google can pull information from various sources when deciding what to display, the earlier your details are consistent, the fewer places you’ll need to fix later.

To simplify things, a tool like RelateLocal can help by letting you manage your business information across online listings from one place. If reviews matter to your business, RelateReviews can help you request, monitor, respond to, and display them.

Start laying your foundations

These small business essentials become more valuable as your company takes on more customers, transactions, and responsibilities. On the financial side, if you ever want to expand your business or get funding, the SBA says lenders and investors will want to see your financial history. When you create clear business processes, less will slip through the cracks as customer numbers grow. And maintaining a consistent presence makes it easier for potential customers to find and trust you. So put foundations in place today, while they’re still easy to set up. 

Frequently asked questions

What are the basic things every small business needs?

The three small business basics that matter most can be broken up into three foundations: knowing your numbers, organizing how the business runs, and having a clear business presence. 

What should a small business set up first?

A good place to start with your small business setup is opening a business bank account to separate personal finances from business finances. Registering your ideal domain name early should also be a priority. 

How should a small business organize its finances?

A key concern of small businesses is how to separate personal and business finances. Opening a separate business bank account for company transactions addresses this. Beyond that, make sure to record transactions in one place as they happen, and properly categorize expenses. 

What records should a small business keep?

You should record every sale, purchase, and expense, including the date, amount, and category, along with supporting documents like receipts and invoices.

How do you organize the day-to-day running of a small business?

Knowing how to organize a small business can be difficult for new and more seasoned owners alike. A good place to start is creating processes for anything you do repeatedly, whether that’s how you record transactions or how you deal with customer inquiries. 

What does a small business need for a professional online presence?

Start with a domain and website that includes a clear description of what your business does, contact information, and how to complete a transaction. If your company has a physical location or you visit customers, you can also claim your Google Business Profile. 

Why is it important to separate business and personal finances?

It makes it much easier to see how your business is performing and accurately report your income when it comes to filing taxes. 

When should a small business start documenting its processes?

The earlier, the better. It may be difficult to properly document processes later as your business picks up and things get busier.