We all know how challenging it can be to manage our personal finances and keep track of how much money we are bringing in every month compared to the amount we are spending on bills and other expenses. Entrepreneurs have it doubly as exhausting because they not only have to track their own finances, they are also responsible for managing their startup’s finances as well.
Even if you have a good system set in place to manage your own money, the world of personal finance and business finance are two completely entities, both requiring a unique set of knowledge and, oftentimes, a unique approach to money management. It may be in your best interest to seriously consider hiring an accountant early on. However, even if you make the decision to prioritize working with a professional at the onset, it is crucial that you are still involved in the process. Do not simply pass off the responsibility – become familiarized with the language of corporate finance and the process of bookkeeping, reading tax documents, and payroll.
Set yourself up for success every year by being mindful of these money management strategies of best practice:
Know Your Numbers
As you begin tracking your finances, it is imperative that you understand how to read your books to figure out the amount that you currently have available. This number may not always be a positive balance and it may not be money that you can use at your disposal – since it will most likely be wrapped up in other important business expenses – but it’s something you should have at the forefront of your mind every month.
Set A Budget For Each Department
Not only do you need to be aware of the money you do have, you also need to budget out where that money will be going. Every department will require some sort of funds and how you choose to dole out that money is entirely up to you. This strategy will be dependent upon your goals for the company, so make sure there is purpose in how you set up your budget, as well as what that money is being used for. As a startup, you want to dedicate funds to departments that will push for the most growth early on or help to sustain your achievements.
Build Up A “Rainy Day” Fund
At first, the majority of your money is going to go directly into your company (think: “you have to spend money to make money”). But don’t continue to throw it all into your company. Build up a “rainy day” fund that will prove indispensable during less profitable times. The amount you decide to put away every month should be something you are comfortable with. Some companies try to do 25 percent, while others only end up saving around 5 percent. Any amount is better than none at all.
Understand Your Funding Options
Needing funding should never be considered a failure. There are certain aspects of business that require a sizable amount of money that most entrepreneurs are unable to front themselves. Understand that there are financing options to you, do your research, and be open to them when opportunities for growth present themselves. At EIN Cap, we specialize in merchant cash advances, which are very different from traditional business loans. Instead of large monthly payments, the amount you pay back is contingent upon the amount of money you made that month. This ensures that you are never put in a financial bind and are unable to afford payments.