Building a business from the ground up is the most difficult thing to do. There are so many things to consider and decisions to make. To ensure your business gets off the ground, you have to be in tune with your business’ finances. There are some pitfalls and financial mistakes newbie entrepreneurs make and this is why we will look at ways to handle your finances better when you are a newbie.
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1. Money Management Is Vital
Many businesses fail because they ran out of money. This may be because their owners do not pay close attention to every dollar that comes in and every dollar that goes out. If you do not keep a close eye on your cash flow, your business will end up in danger sooner rather than later. A good way to ensure this does not happen is to have a robust budget and keep to it, in addition to keeping your financial books in order.
2. Track All Spending
This ties in with having a good money management strategy. Many new businesses have a lot of expenses to cater to and if you do not get a handle of things, the expenses might overrun your business. To ensure you can track everything, hire an accountant to handle your books for you. If you cannot, you can outsource your accounting tasks or use accounting software to keep everything organized.
3. Structure Your Business Properly
Getting your personal finances entangled with those of your business can lead to a lot of issues. Because you are the business owner, any debts and other financial obligations the business has are yours to take care of. To ensure you can manage your personal finances alongside your those of your business, it would be a good idea to establish your business as a separate legal entity. The best way to do this is to form an LLC or Limited Liability Company. Doing this has many advantages, the main one being the ability to protect your personal assets and finances from your business’ losses, debts, and lawsuits.
4. Get a Business Credit or Debit Card
When you’re just starting out, it is easy to get your financials entangled with those of your business. To ensure this does not happen, get a business credit or debit card. This way, you will be able to draw a distinct line between your personal and business finances.
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A business credit card affords you some advantages such as opening up opportunities to get a small business loan or a line of credit when your business has cash flow issues. If you can, find a financial institution that has software or an app that lets you track funds on your business and personal credit and debit cards.
5. Pay Yourself
Many entrepreneurs do not feel like they need to pay themselves and this is not right. Your work and dedication to the business should be rewarded like you would reward that of other employees. You also have wants and needs and if you do not pay yourself, they will not be met.
Also, if you do not pay yourself, your books might not be a true reflection of your business’ finances, as there will be one employee working for free: you.
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Have a Finacial Plan
Setting goals is one of the best ways to manage finances in your business. These goals will guide you on where to spend or not to spend money on the business. Breaking your goals into monthly, weekly, or yearly revenue goals will give you better control.
New entrepreneurs might have a hard time getting a handle on their business’ finances. That said, if you can separate your personal finances from those of your business, you should be able to better handle all your finances, be they those of your business or your personal finances.