Vector of a piggy bank with a coin. Represents managing your small business finances.

How to Set Up and Organize Your Business Finances

Kody Wirth | Oct 27, 2023

Getting your business finances right is crucial for starting a business. Even more so if you want to see your business grow.

Don’t let that scare you. Even if this is your first time dabbling in financial planning, you can break the work into seven manageable steps.

By working through this guide, you can outline startup costs, understand the basics of financial planning, and prepare for accurate and efficient financial management.

How to manage and organize your business finances

Financial management is an ongoing process for business owners. These are the steps you should take to get started.

*Tip:  Before you can open a business bank account and set up payroll—you need to apply for an Employer Identification Number (EIN). Check out our guide to learn how to apply.

Why is it important to manage your finances as a business owner?

Setting up your business finances is more than a startup step. It leads to several long-term benefits:

Informed decisions

A clear understanding of financial health allows you to make decisions based on concrete data. Whether investing in new equipment or launching a marketing campaign—having a clear financial picture reduces risks associated with decisions.

Maintain profitability

Regular financial oversight helps you identify areas of growth and waste. You can maximize returns by focusing on profitable activities and reducing unnecessary expenses.

Proper financial management ensures that all obligations, especially tax-related ones, are met on time. This helps you avoid penalties while remaining compliant with local, state, and federal regulations.

Build trust

Transparent and effective financial management fosters trust among investors, employees, and customers. When stakeholders are confident in a business’s financial stability, it can lead to increased investments, employee loyalty, and customer retention.

Support long-term growth

A solid financial foundation allows you to invest in business growth regularly. Growth could include expanding product lines, entering new markets, or hiring additional staff.

Prepare to do business

Getting your finances in order is the last planning step you need to take. 

You now understand your costs. You have expectations for the future, a relationship with a bank, and have started setting up accounting processes. And whether you need it now or later, you are better prepared to seek additional funding.

You’re ready to take action and prepare your business to launch. With your plans in place, it’s time to select your business location, build your team, and spread the word about your business.

Small business finances FAQ

Begin by understanding your startup costs and creating a financial plan. Open a dedicated business bank account and separate your business and personal finances. Consider using personal funds and setting up a basic accounting and payroll system. As your business grows, explore funding options and decide on a suitable time and method to pay yourself.

The financial structure of a small business typically includes assets (what the company owns), liabilities (what the business owes), and equity (the owner’s stake in the business). This structure is often reflected in a balance sheet, which provides a snapshot of the business’s financial health at a given time.

Finance in business can be complex, especially as a company grows. However, managing business finances can become more manageable with proper tools, guidance, and education. Many business owners start with basic financial skills and expand their knowledge as they run their business. Seek a professional if you’re unsure or struggling with specific financial concepts.

In many small businesses, the owner initially handles finances or delegates them to a bookkeeper or accountant. Larger businesses might have a finance team with roles like a Chief Financial Officer (CFO).

The amount a business owner pays themselves varies based on profitability, industry standards, and personal financial needs. You might start with a modest salary and increase compensation as the business becomes more profitable. Focus on striking a balance between personal compensation and reinvesting in the business.