How To Manage You Finances As A Small Business Owner
If you’re like most growing businesses, you are likely inexperienced or strugglingin the areas of accounting and finance. Don’t be embarrassed, you’re not the only one. Even if you’re accustomed to balancing a perfect budget at home, that doesn’t mean much when it comes to the dailynecessity of running a business ledger. Let’s not even get into having to keep trackof expenses, wages, or capital. By now your head is hurting and you don’t havetime for the things you love but that’s okay. Businesses like mine are there to help you geton your feet and maintain a sense of calm in the financial storm. If you have no idea where to start, use theseideas as a great beginning point to begin your journey to solid business financial practices. All of these tipsare wonderful to start with, and they will help you to build a foundation fromwhich all of your future financial decisions will be easier.
Your money and your business’ money can’t play together
Just pretend your money and your business money are oil and vinegar. They don’t mix; at least they shouldn’t. When you’re a busy entrepreneur it is easy tograb whatever card is handy and swipe it without paying much attention. It is all your money, right? Well, here’s the thing. If you’re attempting to grow a business, the business needs to have money to grow on, right? If you constantly use your business as a wayto supplement your personal finances, you are doing it wrong. Why can’t you mix your business and yourpersonal expenses? Well, from a bookkeeping standpoint, it is confusing and makes reconciliation difficult. There are rules and laws about what can beconsidered a business expense, and it helps you with your taxes when you don’thave to spend hours sorting out what money went where and what type of expenseit was.
You need a budget
Just like you require a budget to maintain your household expenses, your business needs a budget to keep on going. Are you advertising? You need a budget for that. Are you planning on taking a business trip? You need a budget for that. Without a budget, your business will come upshort, and you will be pulling money from your personal expenses (a big no-no) in order to meet your business’s needs. A budget doesn’t mean that you have to have abig chunk of money in place, in fact, if you are just starting out, it ishighly unlikely that you will have access to a lot of capital.
Don’t become a big spender
When we become successful in business, many times our first inclination is to takethose profits and go celebrate with them. Just like our personal finances, you have to be certain not to spend frivolously as a business owner. Yes, we love having some extra money to playaround with, but what good does it do us when we have a business emergency comeup? What if you have a slow month? What if you have an opportunity come up that you need extra money to take advantage of? Look, it is good to celebrate your wins, but add those into your budget and celebrate in a controlled way. This will keep your money growing.
Pay yourself
While you don’t want to take all the money from your business, in all likelihood youhave placed a good chunk of your own personal funds into your business. Now it is time for you to get some of yourmoney back. Make certain that you are budgeting every money to spend some money on yourself. Again, this is not your license to take everypiece of profit out of your business, but it is just a good practice to payyourself first. You’re putting yourblood, sweat, and tears into your business and your business needs to pay yousome of that back.
Be wise with your investments
Part of the problem for small business owners is that they are afraid of using their money to invest in products and services that will take them to the next level. If that isn’t their vice, they’reinvesting in too many services because they are afraid to learn how to managesome aspects of their business alone. Neither one of these approaches is a good one. We need to find a way to achieve some balance. Instead of being hot or cold with your investments, find a way to get a good balance going. If you have the time and the skill to learn how to do something yourself, do so. If you have something you don’t do well, or just can’t force yourself to do, have someone else do it for you so you can concentrate on the aspects of thebusiness you ARE good at.
Don’t procrastinate if you’re in trouble.
If you see there is a financial issue coming up that you can get on top of, do notwait until it becomes a disaster. It’s never good to avoid any problems we see as long as possible. What you don’t want as a business owner is for those problems to bite you in the butt and put your business in a place that will be difficult for it to recover from. If you have a sharp eye on your finances, you know what you are capable of and what you are not. It is going to be important for you to be realistic about which way the wind is blowing. Don’t be embarrassed about being in a slight financial bind. It can happen to anyone, and if you address it quickly, it is more likely to be a small problem thatwill blow over, versus a long-term issue that will hurt your business.
Being a small business owner doesn’t mean you have to morph into a financial guru overnight. What you’re going to need is a solid budget, some wise investments, and some common sense. Use these tips as a starting point, and definitely plan on getting the advice of a seasoned financial expert to help you with everything that you can’t figure out on your own.