The reason most entrepreneurs set up in business is, at least partly, to make money so financial management is a crucial skill which all new business owners or would-be entrepreneurs need to learn if they want to be successful.
However, managing finances isn’t always a skill which comes naturally to many. Entrepreneurs tend to be focussed on their big idea and making it a reality, but the money side isn’t necessarily where there energies are naturally directed.
While you can always outsource your finances to a professional accountant to a certain extent, you still need to know and understand your numbers to enable you to spot any issues or trends which you might need to address within your business.
Here are five tips for new entrepreneurs to help with financial management:
1. Record and organise your finances
Whether you are managing your finances yourself or supplying all of your information to an accountant to deal with, it’s important to be organised and keep records of all of your income, outgoings and expenses.
This includes keeping copies of all your receipts, invoices, and any other paperwork related to financial issues, in an orderly fashion. Just putting them all into a shoe box won’t cut it when you are an entrepreneur.
Just using a simple spreadsheet to record income and outgoings can be enough to start with, when setting up a new business, or as the business grows you might need to invest in accounting software to help record all of the financial transactions.
2. Keep track of your credit score
As an entrepreneur you might well need to seek funding for your business either to start it up at the beginning or further down the line to help with an expansion of your services so make you’re your credit is up to scratch.
The last thing you want to do is start a business only to find your credit score or existing level of debt means you can’t get the funding you need to grow the company a few years down the line. Take action to improve your credit score ideally before you start out.
3. Have an emergency fund
While setting up a new business often involves expense rather than profit initially it’s still important to make sure you have money put aside for an emergency – you might need to suddenly buy new equipment or replace a computer for example, so try saving an emergency pot to help take the pressure off.
You can create the fund easily by putting a small amount aside every week so it needn’t be too taxing to save enough to help keep as a buffer. You never know when a client might not be able to pay you or a supplier might go bust so an emergency fund can be the difference between success and failure.
4. Seek professional advice
If you are brand new to business then don’t get daunted or overwhelmed by all of the financial obligations or requirements. If the finance side is beyond your knowledge then don’t bury your head in the sand but seek professional help.
Whether you hire a full-time professional accountant or use the services of a part-time book keeper they can both help and provide expert advice to guide you as you take your business forward as well as looking after the books. You can even make it easier for you by signing up for accounting services offered by companies like Crunch. You can find out how they help small businesses here.
5. Set short-term and long-term financial goals
As well as knowing and understanding your business numbers you should set financial goals for the business to achieve as well. Have short term goals for what you want the business to achieve in the next month, the next quarter and the next year.
You should also have a longer term forecasting tool to predict the income you expect to bring in over the next year to five years, to help make sure you keep your business on track and meet all of your income goals.
As well as your business goals you should also set savings goals which allow you to have enough put aside to pay your tax contributions every year so you don’t get caught out with a big bill at the end of the tax year and nothing to pay it with.
Conclusion
Financial management is a key element to running a business and is a skill which every new entrepreneur needs to learn if they are to be successful in the corporate world. No business can survive if it’s not financially viable.
There are few tips here to help make financial management easier to cope with but if financial management really is beyond your skill set then you should always seek professional guidance and advice to make sure your business can still thrive, leaving you free to focus on the aspects of entrepreneurship where you are strongest.
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