Top tips for starting a business

Teach Me Money

Starting a new business is an exciting and challenging venture. As a new business owner, you're likely juggling multiple roles and responsibilities, from managing operations to nurturing client relationships. One of the biggest hurdles you might face, though, is not just running the business itself, but navigating how your business decisions, particularly financial ones, impact your personal financial goals.

When running a small business, it is common to work closely with your accountant to figure out how to legally reduce your tax. Let's be real here: who doesn't want to save money on taxes? However, here's something crucial I've noticed in my experience—many people may reduce their taxable income so much that it impacts how they appear to lenders when they're looking to make a large purchase, like buying a home.

I've had clients approach me, handing over their financials, proudly stating they've been in business for a couple of years, only for me to see that their net income is barely enough to get by. They explain how they've managed to get there – through depreciation, interest deductions, and different things like invoice holdovers or prepayments. That's all good – paying little tax can feel like a win, but we need to look at the broader picture.

These financials are not just for keeping the tax man happy; they go to the bank too. When you want to tell a lender, "Hey, look, I make enough to support my lifestyle and fulfil my debts, and now I'm in the market to upgrade to a bigger house," those financial numbers need to back you up.

So, here are my top tips for balancing tax minimisation with long-term financial goals if you're starting a business:

1. Plan Your Financial Future: Start conversations with your finance broker and accountant as early as possible. Let them know your goals for the next year or two, like upgrading to a new home or investing in another property.

2. Understand the Balancing Act: It's crucial to be strategic about how much you minimise your taxes. While it's essential not to pay more than necessary, you need to present your business and personal finances in a way that reflects stability and profitability to lenders.

3. Communicate Openly: Your accountant and finance broker are your allies, not just when it comes to taxes but in your broader financial life. Keep them in the loop about your plans and ensure they understand the narrative you're building for your financial future.

By being mindful of these aspects, you can better position your business to support your personal life goals, such as buying that dream house. The journey of a business owner is all about finding that perfect balance between managing your current financial needs and planning for future aspirations. With the right planning and communication, you can achieve both your business and personal financial goals.

Links

Website: https://goldentrianglefinancegroup.com.au/