From knowing your way around accounting software, to understanding how credit card machines work, there are many different aspects of finance that you need to be on top of as an entrepreneur. However, financial management is a very specific skill, and may not be your strong suit, in which case you’re certainly not alone. Many entrepreneurs’ skills lie in other areas, such as product development, innovation or marketing.
If this the case for you, don’t worry: here are 7 top financial management tips to help you out!
- Set Goals
Goals are a key aspect of good financial management. Having clearly defined goals is imperative for being able to make the right financial decisions, even the small choices that don’t seem to matter but can have big consequences.
Of course, just about every business has the goal to increase profits. However, you need to be more specific in your outlook: do you need to control expenses in order to increase profit margins? Or perhaps expenses are under control but you need to increase your customer base in order to drive more revenue? Or is debt a problem that should be addressed as a priority? Having all of this clearly defined will help you to make better decisions.
- Keep Meticulous Records
When it comes to financial management, the importance of great record keeping should not be underestimated. It is also an area that is easy to neglect, as expense reports and budget tracking can be tedious and may be the last thing you may want to do after a long day. However, failing to keep on top of these things can create huge problems for budgeting and reporting down the line.
Minimise the hassle of record keeping through setting up systems that make this process as quick and painless as possible. Use online accounting tools like Wave to keep your data organised. Most importantly, stay on top of deadlines and keep everything up to date as you go: filling in one day’s worth of data is much less intimidating than filling in the whole year.
- Watch Your Credit
Keeping on top of your business credit is important for a variety of reasons. A lack of financing can kill your business, and it is challenging to find financing for a struggling business, so don’t let debts get on top of you. Having a good credit score is very useful for finding quick funds when you need them.
This doesn’t mean you should ignore your business’ credit, either. It is important to build up a positive credit history through using a line of credit responsibly, and always paying off your debts and interest payments on time.
- Keep Business and Personal Money Separate
This is one of the golden rules of business accounting. It is also one that entrepreneurs commonly break. It can be easy to pay for a business expense out of your own pocket, or to dip into the business funds to cover your rent while you wait for a payment to clear.
However, doing so can be a disaster. This makes accounting a nightmare, means you risks miscalculating the money your business has, and could even get you in trouble with tax authorities. Make sure you have separate business and personal accounts, and keep all transactions and cash flow absolutely separate.
- Have an Emergency Fund
Every business needs a rainy day fund: some money that can easily be dipped into to cover unforeseen expenses, or a sudden drop in revenue. This is especially critical in the early stages of your business when finances can be volatile.
Be prepared for all eventualities by building up an emergency fund. Make sure it is enough to cover any disasters that may hit you, or cover your survival for a few slow months. Keep these funds separate and absolutely don’t touch them for any other purpose.
- Always Pay Yourself
This may seem like an obvious one, but as an entrepreneur who’s just getting started there will probably be times that you choose to sacrifice your own salary in order to keep your business running. This may seem like the best thing for your business, but it can be detrimental to your business’ survival in the long run.
In order for you to be successful as an entrepreneur, you need to be able to support yourself, first and foremost. If your business isn’t supporting you, it is not successful. Make sure that your salary is always the first expense to come off the books, otherwise at the end of the day you may be left with nothing.
- Find a Mentor
As an entrepreneur, sometimes it feels like you need to be an expert at everything. Obviously this is not possible, but you can make sure you have an expert on hand. If you feel like your financial management skills need some help, seek it out.
Find a mentor who can coach you on essential financial management skills specific to your business. You can also hire professionals such as accountants and financial planners to help you in this area.
After graduating in journalism and media, Sophie started working as a freelance writer. She is passionate about traveling and exploring new places. In her free time she also loves to play games on her computer.