Money makes the world go round, and when you’re starting a business, you need to be a bit more savvy about how you approach your finances to ensure you’re getting what you need to get up and running effectively and you’re not misusing your investments or making bad financial decisions that will cost you down the line.
There are going to be many spinning plates; income and expenditure are two that need careful management to get things going. And if you’re not spinning your plates correctly, everything will come crashing down on you.
Let’s take a quick look at how to avoid this happening so you can stay in control of your finances.
Understand Financial Planning
At the very least, you need a rough idea of your projected income and expenditure costs. Whether you start off with funding or not, it’s a good idea to have just a rough idea of what you can expect to make and what your operating costs will be.
Some might have virtually no costs, others could run into the thousands, if not hundreds of thousands, and require you to make money from the very beginning to stay afloat. Wherever you fall on this scale, have an idea of what to expect before things get moving.
Understand Personal vs Business Spending
The sooner you address this, the better your business and personal spending shouldn’t ever merge. At all, never use personal money for business expenses, and vice versa, or things will get messy fast. This is especially true for sole traders who are more likely to do this.
Have separate bank accounts for both, track all spending and transferring of money accordingly, so nothing gets confused.
Understand Expenses
One of the best things you can do as a new business owner is to understand how to track expenses. These day-to-day payments you need to make to be operational count, and the more you understand what you need to pay and when, the better it will be for you to stay on top of things.
If you’re not great with numbers or you don’t understand what you need to track and how, you can outsource your bookkeeping services. This will help keep things balanced for you so you know exactly where you stand.
Contingency Measures
Before things even get up and running, you need to have contingency funds and measures in place.
How much will you need to stay functioning if you lose your major client? How long can it operate without making any money? What will you do if you experience an emergency out of your control? Consider factors such as savings, access to business financing, bringing in another partner, or an emergency fund for expenses in case the worst happens. No one goes into a business thinking things will go wrong, but planning for the pitfalls can help prepare you in the event that plans become reality.
Understand Tax
As a business owner, it’s imperative that you understand your tax obligations right out of the gate. You need to be putting money aside to pay taxes and ensuring that you know exactly what deductions you can make, what taxes you will be paying, and how much you can afford to pay in different scenarios, i.e., if you increase takings or expand into different states. The more you know from the beginning, the easier it will be to plan for down the line.
