When you have just started your business, handling your finances can be a major roadblock. While you need to spend money to get your business up and running, you also need to save enough to see you through a rainy day. Striking the right balance between the two can be challenging, especially when you have to do it on your own.
That’s why our experts have put together their top hacks to manage your finances in the right way. Make sure to put these into practice to take the bull by its horns:
Cashflow management is really everything
Monitoring the money that comes and goes out is one of the critical aspects of running a new business. It is not unusual for new entrepreneurs to end up spending more than they had accounted for. Let’s face it, survival in this hyper-competitive market means you need to do everything you can for your business, which can mean going over budget. New entrepreneurs may also find themselves overextending credit to clients in order to retain their business.
But on the flip side, this may leave you to cash strapped. To avoid getting stuck in this soup, keep a close eye on your cashflows. A regular cash flow can go a long way in ensuring the steady and sustainable growth of your business. Make sure to know the details of cash availability at a given time. Regardless of the size of your business, as an entrepreneur, the control over the cash flow should be yours.
Separation of finances is the way to go
Keeping your personal and business finances separate is the smartest thing to do. In the absence of separation, you may find yourself merging the two and that can make accounting a nightmare.
When your personal and business finances are in the same account, it is not even possible to know whether your business is making money. Moreover, when you are running a business, you need to invest the profits back into the business. It is also easier to track what are your business expenses and whether you need to bring any spending under control.
Make sure to pay your taxes
Commercial taxes are a huge part of managing a business. If you don’t pay your taxes on time, you can be charged with tax fraud. On the other hand, not managing your taxes properly can lead to your business going under sooner than expected.
Make sure to consult with a tax professional to get the right advice about your tax payments. Saving on taxes is not a crime — take advantage of sops and benefits provided by the government.
Don’t take debt unnecessarily
A majority of new entrepreneurs get sucked into a vicious cycle of borrowing debt. While debt can provide support to your business, you need to assess whether you need it and do you have the ability to repay it on time. Defaulting on your loan repayments can have bigger consequences for your business. And sooner than later, you may even find that the debt you borrowed to grow your business has become a liability.
So before you approach a credit provider for a loan, check your P&L to see how your business is faring. If you absolutely need to borrow, explore alternative financing options such as P2P lending or lines of credit instead of opting for a traditional loan.
Set smart goals for your business
An underrated hack for managing finances is by setting SMART goals. Simple, Measurable, Achievable, Realistic, and Timely goals can help you take your business to the heights you always dreamt of.
For instance, reducing expenses, improving profit margins, and forecasting cash flows are some of the key targets you can set for yourself during the initial years of business. These goals will also help you to make plans about the business that seem overwhelming at the moment and execute them. Review the progress of your goals every quarter to ensure that you are on the right track.
Keep an eye on your credit score
Having a high credit score can improve your chances of borrowing debt at more favorable terms. Even investors look at your credit score before making investment decisions.
If you have borrowed any loans, always pay them on time. Even a single missed or delayed payment can bring your score down by a few points. If you have issued company credit cards for your employees, ensure that those dues are cleared by the bill due date. Also, make sure to pay off your utility bills. Even though utility companies do not report to credit check organizations, your default gets reported if your account becomes delinquent and a collection agency is appointed. That’s because collection agencies are mandated to report to credit check bodies.
Don’t shy away from asking for help
Despite your best efforts, managing your finances can seem overwhelming. It takes a village to get your business up and running. Don’t hesitate to ask for help when you need it. Consulting financial advisors, signing up for courses that can teach you more about managing your money, and having a dedicated team at work looking after the finances are some of the other tips you can implement.
Running a business can be a roller coaster ride, and the fear of the unknown can never go away. That’s why when it comes to finances, preparing for the worst is incredibly important. The key is to chalk out a plan and follow it to the T so that you are better prepared to face what life throws at you.
If you need help with managing personal finances, get in touch with Moneyfront. Our team of experts would be delighted to help you figure out the best investment avenues for parking your personal funds.