Five Financial Tips for New Business Owners
Congrats on launching your business! It’s an exciting time, but also nerve-wracking. Let’s walk through a few tips for new business owners, to help you start out with firm financial footing.
Have a Plan
One of the first keys to success in nearly anything you do is to have a solid plan. Careful planning is required to be sure you know where you are heading, how you aim to get there, and the steps it will require.
Chances are, if you are starting a small business, you have had to map out your idea. Perhaps you applied for a loan and needed to present a business plan or sought investors to buy into your concept. Did you include financial planning?
Sit down, and take the time to think about details such as spending limits, a savings goal, how much you want to keep in your bank account as a buffer, and your general cash flow. These are figures you will need to track in real time, but should also be conceptualized before you really get things going.
2. Get On the Same Page
This planning stage can be an especially crucial step for those working with groups or partners. Be sure that everyone involved in your business plans agrees to the financial management of the business. If you have one partner looking to reinvest every cent back into the business, but another that seeks to save a rainy day, you are going to have opposing missions.
When making your plans for the business, be sure everyone discusses the financial future. Agree on your policies and stick to them. If you all start in opposing directions, no progress will make a difference and no one will know which goals you are truly aiming for overall.
3. Keep Track of the Numbers
Also something to consider early on in your planning phases for a new business is the methods by which you will track your figures. Do you plan on having a bookkeeper or accountant who is professionally charged with these responsibilities? Or will an in-house staff member be in charge of finances?
Do you feel comfortable juggling all aspects of finances, such as taxes, payroll, legalities, and so on? Or do you need the help of a professional? Be realistic about your abilities. Where you are less comfortable or knowledgeable, do not hesitate to include someone that has expertise in that area.
Decide early on how and who will keep track of these important numbers. Knowing things like your monthly budget, expected and actual incomes, and expenditures, as well as how those numbers are trending over time, is crucial to gauging your success.
4. Focus on Debt Elimination
One of the most costly forms of money is debt. With high-interest rates, you will want to put together a plan to lower your debts both professionally with your business, as well as any personal debts you may have.
Clearing your debts all around allows you to free up more funds for the future, not to mention saving interest. While you obviously separate your personal and professional (business) finances, you will want to be sure neither negatively impacts the other. If you tank your personal credit, getting loans for your business can be difficult. Likewise, if you are an owner of a bankrupt business, your personal finances can be impacted negatively.
5. Save for the Unknown
What you might call in your household a “rainy day fund,” a business also needs to remember to save for the future. Whether you have an unexpected disruption of business (anyone remember the recent worldwide pandemic?), or you have a small emergency, your business, much like your home, needs the safety net of a savings plan.
Decide each month what you feel comfortable saving. This fund should only be touched for emergencies. Should you find yourself with overages after a year or two, consider reinvesting in your business. But, always leave some funds for the unknown.
No matter what your new business is, it is important to plan ahead and cover your bases. If you don’t feel like a pro in the area of finance, don’t hesitate to reach out to a professional!
