Even with a business degree, managing the finances for your small business can be a complicated and frustrating process. By taking the time to make a habit out of certain practices, you’ll be better able to manage your new business and ensure accurate record keeping.
Keep Track of Your Actual Cash Flow
One of the best ways to practice good finance for your business is to maintain a separate record that documents your actual cash flow. A ledger may show money that is owed, yet has not been received. This gives an inaccurate assessment of the company’s finances. By keeping a record of the cash flow as it passes through your business, you can get a clearer picture of what money your business does have available.
Debt Regret is Buyer’s Remorse for Entrepreneurs
When someone buys a big ticket item, they may later regret spending so much money on the purchase, resulting in buyer’s remorse. Similarly, many entrepreneurs miscalculate how much funding they need to start their business and end up borrowing too much. To avoid a case of debt regret, take more care in determining how much money you really need to get your business off of the ground and only borrow that much.
Maintain an Emergency Fund
Just like a homeowner, a small business owner can be subjected to any number of emergencies. Things like building damage or malfunctioning equipment can present a fairly large repair bill. By keeping a small cache of funds available for these emergencies, you’ll be better prepared to weather the storm and you’ll get back on track much sooner. Just don’t forget to replenish your emergency fund.
Develop a Budget and Stick to it
A budget is important for a number of reasons. Primarily, it can help you manage your expenses and ensure you won’t miss any important payment deadlines. Additionally, it can help you save for future investments in your business, such as new machinery or expanding the size of your store.
In general, as long as you spend less than you earn and set aside funds to cover your taxes, managing your business’ finances should fall into place over time. As you hone your budgeting and planning skills, you’ll be able to maintain tighter control on the company’s cash flow. This will help you plan to reinvest in the business and grow your reach.