Starting a business can be both a great adventure and a taxing slog. Many ideas with serious potential have been sunk by bad financial management. When starting a business there are many things that need an entrepreneur’s attention. In order for the operation to survive though, financial management needs to be near the top of the list. Here are Big Red Cloud’s top five financial tips on how to start your own business.
1. Work and play don’t always mix
The subject of mixing business with personal life has been flogged to death with differing perspectives. One thing is certain though, always keep your personal bank account separate to your business bank account. You need to ensure that you are paying yourself a salary out of your business account and not paying your start up’s bills out of your personal account in addition to your household bills. Having suppliers make payments into your personal account is a disaster too as that cash flow is the lifeblood of your business. Not having a dedicated business account is a recipe for disaster.
2. Consult an accountant
Keeping track of your businesses finances when trying to run every other aspect of a business can be very time consuming. It is also critical that you make the necessary tax declarations and returns. In addition, delving into the critical information that your finances provide will allow you to make better business decisions and unlock your start up’s real potential. One person that can do all of this for you is a qualified accountant. We would highly recommend that you seek expertise on these issues. Even if you feel like you’re savvy in the financial regard, two heads are better than one and you’ll still save yourself an awful lot of time for the day to day running of your operation.
3. Business plan
No start up should be birthed without a comprehensive business plan. The document should outline the financial realities and projections of the operation a number of years going forward. These numbers should be brutally honest and act as a road map to the business growth and success. A businesses without a business plan is doomed to failure and it will more than likely come down to running out of money. If your plan is comprehensive any capital or day to day outgoings aren’t shouldn’t shock you, or threaten the feasibility of the business itself.
4. Personal cash flow
We have already touched on the fact that you should set up a business bank account as soon as you have established the business and start paying yourself a salary. It’s very easy to get caught up in the cash flow of the new business in order to ensure its survival and sometimes you may have to sacrifice more than just your sleep and sweat. If you decide that yo can’t afford to pay yourself the same salary from the business that is going to affect your personal finances. Even if you don’t need to take that step, your personal finances have to be just as important as your business finances when you’re an entrepreneur. We recommend that you always keep track of your personal cash flow so that you’re in the best position possible.
5. Regular reviews
Monthly reviews of the accounts is not nearly often enough. Especially in the early days when everything is not going to be 100% right the first time. Getting reports such as aged debtors and aged creditors will show you how much your clients owe you and how much you owe your suppliers. Information from the accounts may show you that you need to to change your price point or that you shouldn’t have put that personal expense through your businesses books! Information leads to better decisions which will help your business perform optimally. Set aside time to review the figures as often as is necessary and find out what areas of your business need to altered.
Big Red Cloud is a cloud accounting software solution designed for small businesses. With unlimited invoicing and transactions, free accountant access and hundreds of management reports we want to help you unlock your business potential. With full telephone, email and live chat support we won’t tell you how to start your own business but we’ll be there every step of the way. So if you’re interested in Big Red Cloud why not try our free trial?
Related: Cash flow guide for small businesses