As tough as starting a business is, it’s even tougher to stay on top of your finances. A poor financial management system can be capable of breakingan enthusiastic startup. At the end of the year, when you go through your books, you could be shocked at the huge numbers staring at you.
The key to staying in the green is to have a proper financial plan in place. Here are five money management tips to help you stay on top of your finances:
Separate Personal and Business Finances
Many businesses at their start-up stage are usually faced with the daunting challenge of accessing funds to keep the business afloat and having enough for their personal use. For this reason, some resort to using their business money to solve personal problems.
However, personal and business finances should not be mixed. You need to have separate accounts for both finances and religiously resist the urge to dip into your business accounts to solve personal problems.
Use Accounting Software to Stay on Track
As a startup, you need your business to scale, so getting some accounting software is a great idea. Accounting software eliminates bottleneck traditional bookkeeping methods and time-consuming paperwork.
In addition, it helps you to simplify your accounting system, understand your financial performance and hedge inaccurate calculations. All of these are sure to help you stay on top of your finances.
Get the Help of Financial Advisors
Financial advisors are your friends as a startup as they will help you chart through the uncertain terrain of making financial decisions. Even before you launch, you need to speak with an expert on money management. Their advice will be useful for knowing where and how to get funds for starting as well as for operating the business. They can also advise you on tax and loan management.
This may sound like throwing money down the drain, but it’s an effective financial management technique to hedge your business against financial mishaps that happen every day. For instance, an irate driver who’s had her windscreen smashed by the sign post of a local hairdresser may claim damages. But if the hairdresser has her business insured, the situation will be handled without incurring huge financial lose to the salon.
There are several insurance packages you can choose for your start-up such as professional indemnity insurance, business interruption insurance and public liability insurance.
Take Control of Your Cash Flow
Managing your cash flow is crucial to surviving financially. One effective cash flow management strategy is to pay your bills on time to avoid incurring interests. Similarly, you need to draw up clear payment terms with your customers. You can choose to have them pay you upfront for your services or products and be strict but polite when chasing invoice for payment that is overdue.
Finally, you need to think about setting up an emergency savings account to escape business fails. Ensure you’re always on the lookout for expenses that are irrelevant and cut them out.
When you apply all these measures, your business stays protected against financial vulnerabilities.