How do you manage your money successfully while starting your business as an entrepreneur?
I am very self dependant but I have to spend on necessary things when I have a book of ideas I what to start. But I always get caught up in which one I really want to start and how much money it would need to start it. How would j be able to manage my bills and invest in my ideas along with finding the right business to start with? #entrepreneurship #business-management #business-development #money-management #business-intelligence #budgeting
You are on the right track with making money management a priority. You will need to understand basic bookkeeping, bank statements, and tax forms. You can learn to manage your own financial books, but I would recommend hiring an accountant as business profits increase to prepare year end statements and tax forms. It is also important that you set up a checking account specifically for the business. Business and personal funds should be separated. A good rule of thumb is to not pay yourself a salary until the business has made enough money that allows you pay yourself. Having good accounting software or an accountant will help you determine this.
It's okay to spend profits on business use. Usually in the first 1-3 years, money made from the company is reinvested back into the company to help it expand and attract new customers. The more money you invest into the business will help it grow and allows you to pay yourself more money at a later date.
Be wise about what products you invest in as well. Don't reinvest profit in an item that has an unclear or zero return on investment. Invest in smaller products or quantities and keep records on what is working and not working. The most important investment is yourself. Make sure you are investing time to learn and understand the industry you plan to enter. Expand your skills and take training courses to plan the operational side of things.
For a startup, cash is king. Don't spend money on anything that you don't absolutely need.
A common technique is to figure out how much money you need each month to live comfortably. Pay yourself that amount, regardless of how much money you take in. So let's say you need $5000/mo to survive:
MONTH REVENUE INCOME PROFIT
1 0 5000 -5000
2 1000 5000 -9000
3 2500 5000 -11500
4 5000 5000 -11500
5 10000 5000 -6500
6 20000 5000 8500
So you will see profit in 6 months if your revenue projection holds out. Obviously, you'll need at least 11,500 in savings to make it through the hard times.
Be realistic about your revenue goals and your costs, and put yourself on a strict budget.
I found an interesting article that could be helpful and hope it answers your questions.
About the Author: Andrew Cravenho is the CEO of CBAC, which offers invoice factoring for small businesses. As a serial entrepreneur, Andrew focuses on helping both small and medium sized businesses take control of their cash flow.
Every company, big or small, is always concerned about one thing – managing money. Proper financial management is crucial to surviving a volatile economy and the industry competition. Small businesses, especially, need to exercise caution with their financial decisions from the very beginning. It takes more than just a good idea to run a business. Every business needs a financial structure that generates a profit to stay credible. Entrepreneurs need is to be equipped with good money management abilities to turn their venture into a success story.
Not all business owners, however, are adept at handling finances. But that doesn’t mean all hope is lost.
Here are 6 tips for managing small business finances.
One of the first things that you should do is educate yourself about the various aspects of finance. For starters, learn how to read financial statements (if you don’t already know how). This is one important statement that tells you all about your money – where it originated from, how many hands it changed, and where it is.
Financial statements contain 4 essential details – cash flow statement, income statement, balance sheet, and statement of shareholders’ equity. The cash flow statement analyzes operating activities, investments, and financial in/outflow. The balance sheet provides information related to the company’s assets, liabilities and shareholder’s equity. The income statement reflects the revenue earned within a specific period of time. Shareholder’s equity represents the amount by which the company is financed through common and preferred shares.
Separate Personal and Business Finances
Always keep your personal and business finances separate. This entails getting a business credit card and putting all related expenses on it. This should help you track your outlays and keep you in control.
You will also do well in opening a savings account dedicated to your business, wherein you can transfer a certain amount of money from each payment that you receive and gradually build a considerable corpus. You can use this money to pay taxes.
It is important that entrepreneurs stay tight-fisted to keep their expenses in check without hampering customer satisfaction. This, especially, holds true for small businesses.
Every business endures 2 types of costs – fixed and variable. While fixed costs have to be borne irrespective of whether your business is making money or not, there is scope for savings in variable costs.
For example, instead of buying costly branded software, you could work with free, cloud-based, open-source software, which is equally good. Conduct free online calls, video conferences instead of travelling lost distances. You could also try bartering your services with other professionals and cut costs.
Invest in Cloud-based Accounting Software
While you can definitely download regular accounting software to manage your finances, it will never give you the kind of convenience cloud-based accounting software can.
Web-based software provides you with real-time insights as most allow you to store, update, track, and access data from anywhere at any time. Whether you’re at home, office or are travelling, you can conveniently work with your data from anywhere you like. It is error-free, hassle-free and dependable.
Monitor and Measure Performance
It is crucial that you, as a business owner, keep tabs on the movement of your money, especially when large amounts are involved. Keep looking at your company’s financial performance in comparison to the past financial statements to project your future revenue, expenses and cash flow.
Being aware of these aspects will help you make informed decisions for your business.
Hire Professional Help
Everyone needs help, especially a budding entrepreneur interested in making a huge success of his venture. Sometimes, it pays off to engage the services of an expert, even if it is on a part-time basis. They can help you determine where your business is, where it is heading by using and analyzing your data. Make sure you hire someone you trust, though.
Whether it is tax planning for the next financial year, or payment for the current year, their expertise can go a long way in guiding you and bringing you peace of mind.
While owning and running your own business can be exciting, it can also be nerve-wracking, especially when it comes to handling finances in a lucrative manner. Don’t let your business suffer due to poor money management. Keep the above tips in mind and give your venture a bright future.