Hello SOTGC community,
If you’re an entrepreneur who has a good handle on your personal finances, you should have an equal or even better handle on your business finances. However, this is not always the case. I work with many entrepreneurs who have several holes in their financial management that need to be filled. To their defense, I will say, a high percentage of the time it’s not out of neglect, but lack of knowledge, and even a bit of fear.
While business finances and personal finances should be kept separate, the process of how each is managed is very similar. Being a successful entrepreneur requires expertise in a lot of different areas. Arguably, one of the most important aspects of becoming a business owner is keeping your finances in order.
To ensure that you are taking the right steps towards building your business financially, start by putting in place these basic finance tips for entrepreneurs.
1. Create a solid budget
Be sure to have a solid budget in place at the beginning of each year. This will help establish a savings plan for the business and keep expenses in line. There are great (free) websites that are easy to use by entering in the amounts of your monthly bills and will help you create a budget. With a good budget in place, you will be able to see more clearly how to get your spending under your income.
2. Plan for your future
Remember, you should always be saving for your retirement. Even if you’re just starting out and have little income, you should aim for a small portion of savings each month. A good starting point is to open up a Roth IRA and contribute the max each year. Even better, if you can open a SEP IRA or Solo 401K account, this will shelter a large portion of your business income from taxes.
3. Be open to diversifying funds
Even successful entrepreneur ventures take time to grow. By diversifying your funds into other businesses or alternate investment options, you allow yourself some breathing room in the event that your business goes through a lull or significant loss.
4. Keep expenses below your income
Make a strong effort to create an internal process of reviewing your expenses on a monthly basis. Look for things that are not necessary or that you may be able to find cheaper. I am not saying give up on quality products or services, be sure that your purchases make sense with the financial stage your business is at.
5. Put surplus back into your business
If your business has a monthly surplus, use it to pay down your business credit card debts or loans, start an emergency fund, or use these funds to make smart outside investments.
Successful finance management is all about gathering the knowledge and applying a great plan. Once you have a balance between your relationship with your finances and your future goals in place, there is no reason for you to struggle every month with the process. Be smart, put money into things that will grow, and you will begin to reap the financial rewards of your efforts.
Do you feel that you are managing your business finances successfully? Please share your thoughts.