The almighty dollar (or the appropriate local currency for anyone not operating primarily out of the United States) is an understandable preoccupation for entrepreneurs.
Yes, all of them. Sure, there are plenty of business owners out there who don’t view profit as all-important, and even some who are already rich enough that they don’t need to make money — but the former still need to pay their bills, and the latter are no less eager for their businesses to be credible.
Central to the challenge of building a thriving business are accomplishments such as figuring out the fundamental value proposition and shaping a coherent and compelling brand identity. In short, you need to nail the core ingredients — designing a business model that will truly last.
But if you really want to watch the profits stack up, you need to do far more than constructing a reliable money-spinning framework: you also need to manage your money wisely, handling your income and your expenditure with a deft hand.
In this post, we’re going to look at six key tips for handling money or money management that every first-time business owner should keep in mind:
6 Money Management Tips For New Business Owners
1# Track your business and personal spending
It’s easy to make the mistake of having just one account and using it for everything, particularly when you’re starting out in self-employment.
It’s easier, certainly, and maybe you like the idea of doing some general shopping and viewing it as a business expense — but running a business requires professionalism, and it’s distinctly unprofessional not to have a financial distinction.
Further, it’s also decidedly unwise from a legal standpoint, because your business spending gets special treatment but needs to be legitimate.
Hence, having expense tracking software will help track your business and personal spending. By carefully tracking what you spend — splitting your personal spending from your business spending — you can make it much easier to provide legally-valid records, and you can tell when one set of outgoings is hampering the other.
2# Get what you need to operate on the go
Modern business is far more dynamic in a practical sense than the dusty 9-to-5 of bygone eras. Perhaps you’re rushing about to fulfill other professional obligations because your nascent business is technically a side gig until it gets big enough, or you’re venturing out for some vital professional networking.
Regardless of the specifics, you’re going mobile, and how you handle your money needs to follow suit.
Most banking services these days have mobile apps, so you’ll want to get any relevant ones installed and configured (with the necessary biometric authentication) so you can have an at-a-glance notion of how your finances look and what the latest updates are. Throw in third-party options for tracking what you spend to make things even easier.
You should also think about options like invoicing (if you can create and send an invoice from your phone, it can save a lot of time) or taking payment (hybrid retail is a growing market, and you can offer your wares wherever you go through a mobile POS system). Load up on useful apps and mobile services to make your entrepreneurial life significantly easier.
3# Keep your daily outgoings to a minimum
I just touched upon the potential of your personal spending to affect your business, but your business spending is more likely to be a problem.
Even if you can vaguely justify a purchase as a business expense, it doesn’t magically become free — so getting expensive lunches on a daily basis can easily cause you some major financial issues before long.
It’s vital that you keep your spending in check. Don’t shut it down altogether, because you need to invest in the infrastructure of your business: you might need to pay for software licenses, but computer equipment, hire freelancers, etc.
Just stick to outgoings that are absolutely warranted, and consistently review your spending to confirm that you’re not missing anything significant.
4# Stay firm concerning client payments
When your business is new and it’s the first you’ve ever run, you’re likely to feel some significant trepidation about dealing with clients.
You need them to grow your business, after all, and landing your first client is a monumental step. What happens after that? You can feel a great sense of obligation to that client, being eager to impress them at all times.
There’s nothing wrong with feeling that way, but clients can take advantage of that eagerness by being overly demanding and testing the boundaries of your professional relationship — most notably by being late to pay you. If you act as though it doesn’t matter, they’ll be emboldened to do it again, and that can be disastrous to your bottom line.
Due to this, you need to be firm with chasing invoices. Don’t lose your temper or issue any basic ultimatums: just be absolutely clear about when your payments are due and what the consequences will be if they’re not paid on time.
Having some wiggle ground for your best clients is fine, but it can only go so far before it threatens your operation.
5# Don’t put much stock in financial forecasts
Making predictions based on your current performance is a necessary part of business, not only for doing basic things like ordering new products but also for courting investment.
You’ll need to look at how much money you’ve been making and come up with a realistic road-map for the years to come. How quickly will you grow? How will your model change?
When you engage in this kind of forecasting, though, be mindful of how inaccurate it can be. You can’t know the future, and you couldn’t factor in every variable even if you could be assured of a static marketplace (and you certainly can’t).
Many businesses have come to ruin because they’ve had some successes and optimistically assumed that they’d continue. Always be aware that things can go wrong at any time, and don’t spend money you’ve yet to make.
6# Build up savings as soon as possible
Speaking of things going wrong at any time, you need to have a plan for this, and it’s essential that you build up emergency savings to cover you in the event that everything falls apart.
You might want to make hay while the sun shines and invest all your early profits into infrastructure, but be cautious: if you’re certain that the core of your business works, then there’s no rush.
Aim to save enough money to keep your business going as usual for an entire month. If you can’t get back on track within a month, then your business likely wouldn’t have survived even with enough savings for a year.
And yes, it takes time to save this much when you’re starting out, but that’s alright: just set aside what you can, but start as early as possible.
These six tips for managing your money should help you give your first business a great chance at success, so keep them in mind as you chart the choppy waters of self-employment.
You May Like To Read:
- 8 Creative Ways of Saving Money for Younger Millennials
- How To Be Smart With Money When Investing
- Have You Been Investing Wrong? 8 Finance and Money Myths Busted
Author: Stevie Nicks, digital editor at Just Another Magazine.