Like living beings, every business goes through a cycle of infancy, maturity, and finally, the renewal stage. The idea of starting your business and turning your dream into reality is overwhelming. While launching it at an early age, you might face some downsides. You will find it surprising that most startups generally fail during the initial phase — the reason being poor finance management and negative cash flow.
Finance management refers to the process of managing money for a business to survive a healthy and prosperous life. Failing to do so can spell disaster. Perhaps, your business might go bankrupt, and the dream to start your enterprise might shatter into pieces. Instead of sitting back and hoping to get things better, you need to rise to your feet and manage financial activities to streamline the business operations. However, it may seem like a daunting task. The below-mentioned tips can guide you to manage business finances and evolve your startup smartly:
1. Use the latest technology
Being an entrepreneur, it is essential to hire a skilled workforce to manage your business finances. It is further important to have thorough knowledge about the industry, use of technology, and the required plan of action to execute any particular action. If you’re wondering where to begin and how to learn the basic know-how? Don’t sweat it.
The continuous developments in technology have made the lives of business owners much convenient. You can leverage accounting software and other financial management tools to understand accounts receivables’ nuances, manage taxation, and make intelligent financial decisions. It can also help you monitor your business transactions more efficiently. All in all, utilizing software and applications can make your business go a long way and enjoy the benefits in the long run.
2. Stay Ahead of Deadlines
Imagine you remain entirely oblivious of your upcoming deadlines and end up with a colossal amount piled up at the end of the month. Had you stayed alert about the deadlines, this would not have occurred.
Missing deadlines will not only increase your stress level, but the thoughts will also keep nagging you at the back of the mind. Consequently, you might not pay full attention to crucial tasks that ensure your business growth. It is best to schedule weekly reminders or maintain a record of payments so that you do not miss any due dates. Consider these deadlines as motivation for your business, and instead of fearing them, make sure you stay ahead of them for smooth operations.
3. Make a Separate Personal and Business Account
Most young entrepreneurs fail to distinguish between their personal and business accounts, resulting in confusion and chaotic financial records. If you are one of them, you need to stop this practice to manage your finances more effectively. Keep both of your accounts separate, as it would help you to simplify your tax returns. Since your clients will pay you on a business account and not a personal account, it would further create a sense of credibility. As a result, you can build trustworthy relations with your clients. In addition to it, separate finances help to increase your business’s credibility.
4. Save Cash in Reserve for Emergency
All these finance management tips play a vital part in improving cash management to a more considerable extent. However, there may arise some unforeseen situations where you might be in dire need of emergency funds. How would you do that if you have no emergency savings account beforehand? Therefore, create an emergency funds account and deposit some amount regularly for a rainy day. It is recommendable to store up to three to six months of savings in that account. Therefore, if anything goes south, you have your reserved finance to rebuild yourself or get employment.
5. Keep Tabs on Spendings
Are you habitual to use your debit or credit card for small spendings? These small expenses, when summed together, can form a large bill that might catch you off guard. Your small costs may include lunch with a potential investor, some causal office equipment, an unplanned business trip, etc. Nevertheless, you need to keep track of these expenses to avoid any misuse or overuse of money. Doing so can assist you in identifying real-time finances. You can determine the places or situations where you might be overspending and make changes to control such expenditures.
Initiating a startup and managing its finance for sure isn’t an easy feat. Not knowing your numbers and getting too comfortable with the business can eventually lead to severe disasters. For entrepreneurial success, it is vital to have sound knowledge of the industry to embrace the challenges that the journey might throw at you. With effective money management, you can acquire new customers and find opportunities to expand your business. All you need is to have a growth mindset and align your startup’s objectives with the industry’s changes.
Sherley Alaba is an eagle-eyed wordsmith; a writer and translator, always interested in ways which can help individuals (especially youth and women) reach their full creative potential. Her focus has been on writing, producing and editing stories on business, finance, interesting personalities, entrepreneurs, culture, the environment, gastronomy, lifestyle, and social issues.