Thousands of new businesses are started each year across the country, but not many of them succeed. In fact, just about half survive to their fifth year. One of the main reasons behind failed startups is the inability of their founders to keep an eye on the financial side of the business. Even the best business idea in the world won’t help you much if you overextend yourself and spend all your money in the first few months, leaving nothing for payroll or other expenses. The situation is further exacerbated by the fact that most entrepreneurs while being experts in their respective fields, know next to nothing about the financial aspects of running a company. Here are some
tips on how you can overcome those issues and survive to tell the story.
Set a Budget
It may sound boring or even unnecessary, but setting and keeping a budget is essential to new entrepreneurs. Keeping a sharp eye on your expenses and trying to keep them at minimum at every turn is perhaps your most important task in the beginning. A set budget will help you in that regard, as you will have a clear picture of how much money you have in reserve and how much you can spend each month. Make sure to include all expenses, like rent, labour, tax and everything else. Putting it all on paper will also be useful when creating long-term plans, as you will have a clear picture of how much money you spent in each previous month.
If you want to stay on top of your game in business, education is the key. Always keep an eye on new developments in your field and even on those which are not in your immediate area of interest. For instance,
keeping up with AskTraders finance news
may not benefit you right away, but you never know when it can come handy or an opportunity may arise for you to put that knowledge into good use. you will always have fresh insights about which options make money. Education is always a good option. If a new technological breakdown occurs and you remain unaware, you can bet that your competition will take full advantage of the fact and leave you in the dust. Another area you might want to keep an eye on are new laws, so you can benefit from any positive change or at least stay clear of any restrictions.
Pay Attention to Your Cash Flow
A $100,000 sale coming in on Friday won’t help you much if you have to shell out $50,00 to your suppliers on Wednesday. A two-day extension is probably easy to negotiate, but it is best done in advance, not on a due date. Billing schedules, paying terms, and fixed costs all affect the dynamic of your cash flow and how much money you have at your disposal at any given moment. It will also help you determine the scalability of your business, as it will give you a clear picture of when the money goes in and out of your account.
Get an Accountant
There are many examples of startup businesses getting by without an accountant, but we would not recommend following their example. An expert accountant can make your life so much easier by taking the burden of everyday finance off of your shoulders, leaving you to deal with the things that matter. They will take care of taxes, everyday bills and provide you with advice like how much money you need to keep in reserve. Make sure that your accountant has at least some experience with entrepreneurs, so that he or she will be prepared for all the challenges that may arise. And you never know, it may be the accountant like the one Ben Affleck played, so you will get help with competition as well.
Get New Customers
One of the key tasks you will be faced as a new entrepreneur is customer acquisition. You can’t have cash flow without cash coming in and
you can’t have that without paying customers. Whether you like it or not, sales are the most important factor of any business and you need as many clients as you can handle as fast as you can get them. They will provide you with a steady income stream which will enable you to do all the things you have planned.
Keep Personal Finance Strictly Separated
There are so many examples of people running a business into the ground by not being able to restrain themselves and taking money from the company for their own personal expenses. The moment they see some serious money on the company account, they start dreaming about a new sports car or a second home. This is a big no-no, and you need to keep your fingers out of the till. Set up your salary and pay it regularly, but never take money from the company account for yourself, especially the money intended for other purposes, like paying a supplier or wages.
Many people find the finance side of business boring and we can’t really blame them for that. Paying bills, creating payrolls, and calculating taxes are not the reasons new entrepreneurs risked all they have and started a business. They are, however, crucial and they need to be done, regardless of how mundane they seem. In the end, understanding finance will help you better understand your business.