Running a business isn’t a piece of cake – it requires the right set of skills and a lot of effort and time. Entrepreneurs have to juggle multiple roles and responsibilities, such as management, planning, marketing and customer service. But perhaps one of the most challenging tasks is managing their finances efficiently. Let’s face it – when it comes to businesses, everything revolves around numbers. Thus, you can’t aspire to become an entrepreneur unless you have some financial skills.
Many business owners dread dealing with financial responsibilities, like creating financial statements, monitoring business accounts or filing taxes. They’d rather spend time improving their strategies and innovating their products. However, learning to manage your cash is critical, as your entire business depends on it.
Fortunately, it doesn’t have to be a struggle – everyone can become an expert at monitoring their business finances. All it takes is practice and learning the right tips.
Set a business budget
Establishing a budget is essential for any business, as your venture’s success depends on your financial decisions. You cannot expect growth unless you build a budget aligned with your goals. You have to set up realistic objectives and consider how much you can afford to spend. Creating an adequate budget provides flexibility and ensures lasting success. Moreover, it helps you make the right decisions for your business, mitigate risks and achieve goals.
But setting a business budget isn’t the most challenging part – sticking to it is trickier. Once you’ve established your budget, you have to limit your expenses to what’s absolutely necessary at a specific time. Sometimes you may have to make some adjustments, depending on the challenges that come along your journey and impact your budget. Only veer off the initial course if the situation requires it – otherwise, try to stick to your budget as much as possible.
Check your finances often
Businesses are all unique, and they may face different challenges. This is why there isn’t any rule for how often you should review your finances. Supposing you’ve only launched your businesses recently, you’ll likely have to check your finances frequently. The same is true if you’ve owned a company for a while but face cash flow issues.
While some entrepreneurs may need to review their finances more often than others, they all have to make time to manage their business finances. You can’t just postpone this task and say you’ll deal with it when you have time – financial management requires consistency if you want to keep your business afloat.
Use adequate software
As a first-time entrepreneur, you should make the most of every resource that can help you boost your business. Technology is such a resource, as it provides entrepreneurs with various tools and software that can help them save time that they’d otherwise have to spend on repetitive tasks.
Plus, the government also helps businesses stay on top of their financial matters through the Making Tax Digital programme. The purpose of this initiative is to help businesses get their taxes right. To this end, using Making Tax Digital software can help entrepreneurs streamline business taxes, ensure compliance for their organisation and avoid making errors.
Build an emergency fund
Being a business owner comes with a significant advantage – your revenue potential is limitless. However, achieving financial goals is no cakewalk, and this is especially true for newly established businesses. You may face challenges along the way, and it’s better to be prepared for them. Even the most successful organisations go through times when they struggle financially. Regardless of how good you are at planning, many things, like market shifts, are out of your control.
Having an emergency fund in place can help you be better equipped for unforeseen situations. That way, you’ll be able to save your business during those times when your income drops. There isn’t a specific amount that your emergency fund should hold – the point is to have enough money that helps you get through the challenging times and secure your business financially.
Separate your personal and business finances
Mingling your personal and business finances may be tempting, especially when you’re at the beginning of your entrepreneurial career. But doing so doesn’t allow you to get proper financial information about yourself or your business.
Plus, you have to ensure a part of your business income gets to your personal account, as this is how you’ll keep yourself financially stable. If you combine your personal and business finances, you won’t pay yourself anymore – you remain with the money left after paying for everything else. This can make your business unsustainable because your money goes only into the organisation, and you are left with no money that can support your living. Thus, make sure you have a business bank account from which you can draw your salary.
Keep a good credit score
Good credit is crucial for business owners as it establishes the value of your credit and allows you to open accounts, apply for loans and keep a steady cash flow. Thus, it’s essential to know your credit score and maintain a high rating.
If you have a poor credit score, make sure to pay your bills on time. Also, double-check to make sure your credit report is up-to-date and accurate.
Hire a professional
If you struggle to manage your finances efficiently, you can always ask for help. Regardless of how much you learn about accounting and money management, your skills won’t equal an accountant’s expertise.
An experienced professional can help you understand complex financial matters, such as tax laws. Without an accountant’s support, you may face an unwanted surprise when the due date of your taxes comes. Tax regulations can impact your organisation’s ownership structure and how you can spend your money to reduce financial obligations when the tax time arrives. However, hiring an account doesn’t mean you shouldn’t get educated on financial matters anymore. You should still ask questions about your business’s financial state.
Making financial mistakes can negatively impact your business. However, you can ensure your venture runs smoothly by following the tips above. While managing your business finances may seem challenging, things get easier once you get educated and make informed decisions.