As a new business owner, managing your finances is one of your most important jobs. You only have a limited amount of money to play with until you start turning a profit, and if you are not sensible with it, you will never be able to get the business off the ground. The problem is, business finances are complicated and if you don’t have much experience, it’s easy to go wrong. But you should be safe as long as you follow these 4 golden rules for managing business finances.
Track Cash Flow Precisely
The first step towards financial security is knowing exactly what you’re spending and what you are earning at all times. If you do not track your cash flow precisely, that’s when you will start to make mistakes and you won’t realize that you have financial problems until it’s too late. It’s important that you invest in some professional accounting software like Sage and outsource to leading Sage accountants so they can record every transaction that is made by the business. If you are not aware of what is happening with your money, it’s so easy to lose control. It only takes a few bad decisions to sink a business, so make sure that you are always tracking your cash flow precisely.
Never Mix Business And Personal Finances
If you are out buying supplies for the office and you remember that you need something at home, it’s easy to just grab it and put it on the business account, but that is the start of a very slippery slope. Once you get into the habit of mixing business and personal finances, the purchases will become bigger and bigger. You may end up taking money out of the business and landing it in financial trouble, or you might be propping up the business with your own money and causing yourself personal finance problems. Either way, it’s not good, which is why you have to keep them separate. As soon as you start a business, you need to open a separate business account and keep it separate.
Know The Law
There are a lot of laws around business finances, particularly when it comes to things like pay or taxes. If you break these laws, whether on purpose or by accident, you will be subject to some big fines and that will put you in a very difficult financial position. That's why it’s important that you spend some time understanding the laws around hiring and paying employees, protecting sensitive data, paying your taxes, and managing health and safety. Your business may not survive a big fine at this early stage so it’s vital that you avoid it.
Keep An Emergency Fund
It’s always sensible to have a personal emergency fund to pay for unexpected expenses and you should do the same with your business. If you set some money aside to act as a buffer, it makes it easier to deal with cash flow issues or tough situations where a client is late paying an invoice, for example. All businesses have their slow periods sometimes, and an emergency fund will help you make it through.
As long as you follow these golden rules, you should be able to manage your business finances effectively.
