Being an entrepreneur implies juggling multiple roles, tasks, and responsibilities, and for that, you need to gain knowledge and skills in a lot of different areas. Arguably, one of the most important aspects of running a business is understanding money matters and knowing how to manage your finances effectively. Money is the fuel that powers your business – everything revolves around it, so you can’t afford to go into entrepreneurship without having at least some basic financial skills.
Unfortunately, finance management is what often causes the most headaches for new entrepreneurs and is also the area where most mistakes are made. That’s also the reason why so many entrepreneurs simply dread handling financial tasks such as creating a business budget, monitoring business accounts, creating financial statements, or filing taxes, and would rather focus on bringing their vision to life and other business-related aspects than on the numbers. But since you can’t have one without the other, finance management is something you can’t afford to leave on the sidelines.
It’s true that monitoring your business finances is a complex and cumbersome job, and given the high number of items you already have on your to-do list, it’s understandable that you might feel overwhelmed by it. However, you don’t have to struggle to stay on top of your business’ finances, even if your experience as an entrepreneur is limited. With the right tips and some good practice, you can turn from novice to expert and learn how to manage your business finances like a pro.
Create a budget and stick to it
One of the key factors in running a thriving business is rigorous and sound budgeting. There can be no growth or evolution in your business if you don’t know how to create a budget and make financial decisions accordingly. Budgeting is about developing a spending plan for your business based on your revenue and expenses and setting up realistic objectives. Having an accurate budget guarantees flexibility and long-term success – it helps you mitigate risks, make smarter business decisions, achieve short- and long-term goals, and ensure the financial health of your venture.
However, the trickiest part is not crafting a business budget, but sticking to it. Once you have a budget in place, you have to refrain from veering off course. Oftentimes, adjustments have to be made, depending on your specific financial circumstances and the challenges you may face, and that might bring changes to your budget. But unless you have strong reasons to deviate from the initial course, you should do your best to stick to your financial plan.
Review finances as often as necessary
There’s no rule that says how often you should be checking your finances since each business has its unique requirements and challenges. For example, if you’ve just launched your startup or you’re running a company that has cash flow issues, you’ll probably have to review your finances more often.
But while the frequency may vary from case to case, the one thing all entrepreneurs should do is set time aside to focus on managing business finances. You can’t leave these tasks on the back burner to pile up and deal with them whenever you have time. You have to be consistent when it comes to financial management, or else you won’t be able to keep up with business demands.
Use the right tools
As a newbie entrepreneur, you can certainly use all the help you can get, and that includes employing the right tech tools and software to help you stay on top of your finances. These days, tech solutions give entrepreneurs the possibility to save a lot of time and energy on all sorts of repetitive and routine tasks that would otherwise take ages to complete.
What’s more, the government is also trying to lend a helping hand in this respect with their Making Tax Digital initiative – a program that is meant to make it easier for both individuals and businesses to get their taxes right. For that, you’ll need to use a Making Tax Digital software that will help you streamline business taxes, reduce the risk of errors, and ensure compliance for your company.
Ask for help when needed
It’s not just technology that can help you out and take some of the load of managing business finances off your shoulders. As much as you learn about money management, accounting and bookkeeping, your skills still won’t be comparable with the knowledge and expertise of a trained accountant.
For more complex financial matters, it’s always best to seek the guidance and support of an experienced professional. That’s not to say you should let your accountant do everything for you and never ask a question about the financial state of your business again. You still have to stay informed and get educated on all things finance, but a versed accountant can do the heavy lifting for you and provide you with the insights you need to make better data-driven decisions.
Create an emergency fund
In business, you always have to prepare yourself for the worst-case scenario, even if everything seems to run smoothly. No matter how thorough you are in managing your finances and planning each business move, risks are a given. So, having a safety net in place in the form of a business emergency fund is something all entrepreneurs should consider.
In case something goes wrong with one of your plans or a sudden crisis threatens the financial stability of your business, your emergency fund can soften the blow, minimising the damages or helping you avoid them altogether. There’s no fixed amount you should put aside for emergency situations – the purpose is to have enough money to overcome potential rough patches and ensure financial security for your business.
As difficult and challenging as money management might be for new entrepreneurs, financial skills are something one can learn and hone over time. So, if you got off to a rough start, you should know that all is not lost. Patience and perseverance will help you learn the ropes in finance and ensure a bright future for your business.