Being a good entrepreneur takes a lot of skills. You need to be passionate, be great at communicating, be able to sell and market your product and so much more. However, one of the most important parts of being a successful entrepreneur is being able to manage your finances.
Operating a business is an expensive endeavor, with many hidden costs existing that you will be responsible for. If you can’t successfully manage all of your finances, running a business will prove difficult. Without any further ado, this article is going to go over a couple of key finance management tips that new entrepreneurs should keep in mind.
READ ALSO: Get your business going, even if you don’t know where to start
Have a Plan and Some Goals
First and foremost, you need a plan and have to set some goals. Every company will have different financial goals, and reaching them will require different things. Some will want to boost revenue, some want to reduce costs, and others may want to boost their ROI when it comes to marketing. While every company wants to make money or grow, there are many different ways that can be done.
These goals and plans should not only be fairly specific but also measurable. This will ensure you can track your success over time and see how it’s going. Also, be sure to put adequate research and thought into these plans. For example, if your goal is to build the company up and then eventually sell it, be sure to read more here and learn more about how that can be done.
Track All Expenses and Budget
Next, you want to make sure you are tracking all of your expenses. Another aspect of your key finance management tips is to be aware of all that you are spending, and on what. The best way to do this is to keep a budget and update it often. Your budget should also keep track of how much you are bringing in every month, so you can easily check your profits and make sure you are still operating successfully.
The better organized you keep all of your statements and other financial documents, the easier everything will be to track. While tracking all of this can seem like a boring and long task, there are several different budgeting tools that can help make it quick, painless and easy. If you aren’t budgeting, it can be difficult to know exactly how much you are making, and what you are spending each month.
Have an Emergency Fund in Place
While it would be lovely if your businesses always went perfectly, this isn’t often the case. There are ups and downs in sales, and it is impossible to predict what can happen. Incidents and unfortunate situations can always come about, and you need to be prepared for them. That means you need to have an emergency fund in place.
The amount will vary depending on your costs. The higher your business-related costs every month, the higher your emergency fund should be. In general, it should be able to cover anywhere from around 3 months of expenses up to about a year.
Build Your Knowledge of All Things Finance
Finance is one of the most important parts of the business. If you know marketing and sales but are clueless about finances, your business could struggle. As a result, you should do all that you can to build your knowledge of finance. This could be done by listening to a podcast, reading a book, speaking with experts or even reading blogs online.
Be sure you know all of the important terms and the finance ideas that help keep businesses operational. You should know about loans, insurance, interest and many other important themes. While you don’t need to become Warren Buffett to run a business, you should have a solid understanding of finances.
Find Ways to Save
While making money is important, saving it is just important. Running a business is full of uncertainties, and you can’t expect or rely on things to always continue being the same. As a result, you need to find ways to save as much as you can, so you are protected if things take a turn for the worst.
One of the best ways to save is to reduce your costs. This can be done through simplifying processes, cutting the costs of materials or even rethinking your current agreement with providers. Other great ways to save include not taking on expensive debt and find ways to reduce the amount of waste at your company.
Be Careful When Investing in New Technology
In the modern day, there are few things more important to businesses than technology. It can boost productivity, improve efficiency, lower costs and simply processes. There are hundreds of different apps, tools and pieces of software that companies use each and every day. While using these technologies can certainly improve your business, it is important to be careful.
Every time a fancy new technology comes out in your space, you don’t immediately need to adopt it. Instead, do some research and let that decide which ones you could use, and which you can pass on. If you adopt every new technology, not only will you have to spend time and money training your team on it, it might not even end up helping you very much in the long run.
Try to Maintain Good Credit
When running a business, one of the key finance management tips is to be mindful of your credit. Having good credit for your business means that you can have access to quick (and generally affordable) financing if you need it. Also, investors and many suppliers will often prefer to work with companies that are in good standing credit-wise.
Improving the credit of your company is all about using it intelligently and responsibly. This can be through getting loans and paying them back and making all payments on time. While the credit score of your business won’t change overnight, making the right changes can yield results relatively quickly.
Know the Available Tax Breaks
As a business owner and entrepreneur, you need to know the available tax breaks. Entrepreneurs generally have to pay a lot of taxes, and it can limit your ability to grow as fast as you may want. However, there are almost certainly some things you could be doing to lower the amount you have to pay.
Be aware of the tax breaks offered in your area or industry, and see if you can qualify. These range from a tax break for hiring veterans, to one for making sure that your workplace is accessible for disabled workers. Without knowing these, you might be losing out on a lot of potential benefits.
If you feel a bit uncertain in this space, there are always experts you can work with that can help you out when it comes to taxes and what sorts of breaks you might be able to take advantage of.
In conclusion, we hope this blog post has helped you learn a couple of crucial finance management tips for new entrepreneurs.
Author: Ashley Lipman