Managing the finances of a business is a challenge for everyone from the smallest mom-and-pop shop to the largest megacorporation. As a business owner, you have full control over your affairs, but that comes with the responsibility of managing your own money. If you don’t have any experience in financial matters, you can easily fall into bad habits or make mistakes that could impact the health of your business long-term. Educating yourself about the fiscal realities your business will face is one of the most important things you can do as an entrepreneur.
Although it can often be tedious and require painstaking attention to detail, it’s crucial to keep your finances in order if you want to be able to make informed decisions about your business. If you’re just getting started, let’s go over five basic financial tips for managing your own business.
1. Practice good financial habits.
Starting off with healthy financial practices is the best way to make sure they turn into routines. Having protocols established for budgeting and frequently reviewing your finances internally will help you keep track of your results in real-time and allow you to catch mistakes before they spiral into larger problems. Watching your finances closely will also help you spot fraud early. Set rules for your business and your employees and hold them accountable. Careful analysis of your financial habits will also help you identify what tactics are the most profitable for your business.
So, how will you assess your financial habits and know what to change? One of the best ways of doing this, especially if you’re running the business all by yourself, is by understanding where you fall in the money personality types. Once you know if you’re an accumulator, maverick, alchemist, celebrity, connector, nurturer, ruler, or the romantic, then you’ll know how to deal with your habits and make better financial decisions.
2. Use technology to maximize efficiency.
Depending on what industry you work in, the technology available that’s relevant to your business will vary. Still, you want to keep abreast of new types of software or hardware that can give you an edge. One example is OKR software. OKR stands for objectives and key results and OKR software can help you keep your work-from-home and distributed teams in sync and operating effectively. Having a process and clearly outlined goals for your team is the first step to ensuring that they’re met. Identifying areas where you can improve your performance with updated technology is a great way to cut costs and boost your profitability.
3. Consider enlisting expert help.
While owning your own business might seem like you’re on your own sometimes. It becomes even more intimidating when you’re running everything from production to distribution of supplies by yourself. In case you find yourself in such situation, you can and should seek outside assistance if you find yourself overwhelmed or unprepared. If your business involves eCommerce, you can look online for accounting for e commerce. If you don’t have any background in accounting, it’s worth it to invest in an expert who can make sure you get it right. There are many different types of accounting software, consultants you can hire, and books you can read to help you ensure you understand how to keep your finances in order.
4. Separate your personal and business finances.
When it comes to tracking and monitoring your finances, a separate account for your business is invaluable. It’s easier to know when you go overboard with your spending when you have two accounts. You’ll also find it a lot simpler to calculate your business expenses and profits, which are the key factors of determining your performance.
Another reason to separate your finances is to keep you always prepared for auditing. A dedicated bank account provides a clear proof of your cash flow – income and expenses. For tax purposes, it also makes far more sense for your business to operate independently of your personal bank account.
5. Save for emergencies.
Experts recommend saving for three to six months of expenses in case of an emergency in your personal life, and your business should consider having an even larger cash reserve than that. You can never predict what kind of sudden events in the world or in the market might affect your business at any given time, and every industry has ebbs and flows in terms of demand. Being prepared for the lean times, or for an emergency, could be the difference between keeping and losing your business.
The freedom and power that come with owning your own business are tied to the challenge of maintaining your endeavor’s financial health. If you don’t have a background in finance managing your expenses and maintaining healthy financial practices might seem intimidating, but there are resources available to help. Outside help like an accountant or eCommerce company might be worth investing in considering the importance of meticulous accounting.
No matter what your business, there are simple and finite rules that can help get you started off on the right foot.
The first step towards financial success as an entrepreneur is to understand your money personality. You can do this by assessing your financial habits and making the necessary changes. Outside help like an accountant or eCommerce company might also be worth investing in considering the importance of meticulous accounting. While at it, be sure to take advantage of modern technology and what it has to offer.