Starting a business can be quite an intimidating factor for many small entrepreneurs, and for good reason. However, if you’re like many people starting a business, the thing you’ll likely be most worried about is how to manage all of the money you’ll be dealing with on a daily basis, and the best way to do that is to learn how to manage your money in the most effective and straightforward way.
When you’re starting a new business, employ these money management tips to make sure your books stay straight and your new business is running smoothly.
1. Pay Yourself First
It might sound counterintuitive to running a successful business, but paying yourself before you take care of other things is tantamount. Without a salary that allows you to at least live a stable, relatively comfortable life, you’ll be unable to run your business the right way.
If you can’t afford to pay yourself and keep your business going, even if that means not expanding at the moment, something isn’t going right.
2. Monitor Accounts Receivable
The accounts receivable ‘department’ of your business is perhaps the most important of all since it’s the one that actually brings in the money. That means it needs to be high up on your list of priorities when it comes to money management tasks.
One problem many business owners face is clients not paying in a timely manner. While allowing some clients slack if they have a proven track record might be fine, offering discounts for those that prepay all or the majority of their bill is a better way to make sure you’ve got money coming in faster than it’s going out.
3. Stay Current with Accounts Payable
Not having enough money to pay your bills is pretty much the worst fear of every business owner. However, there are ways around running into snags when money is tight and you need to buy certain things to keep going.
The best thing you can do is set up a payment plan that allows you to make purchases when you’re bringing in the most money. Like any business, you likely have a busy season, and that’s the time to do your buying for the year.
Asking for the same prepayment plan with a discount that you offer your customers is also a bright idea that can save you a considerable amount of money.
4. Keep Accounts Separate
Any accountant will tell you – keep your personal and business accounts separate. It sounds like a no-brainer, but when cash gets short on either end, it’s easy to think about juggling that money.
Make sure you set up different accounts and don’t worry about linking them. In fact, keeping them truly separate is something you might consider doing to keep from confusing what money goes where.
5. Track Your Finances
If the idea of checking your business account to see how much money you have there is worrisome, you’re not alone. However, not knowing is a lot worse, and not keeping up on what could be a problem before it becomes one is the worst thing you can do.
Ideally, you should be setting notifications in your online banking if your balance drops below a certain level. That level is up to you – but at least a month or two of operating capital or more is essential.
Running a business isn’t something you can learn to do overnight, and you’re going to make mistakes when you first start out. However, it’s limiting those huge mistakes that will allow you to continue on – that and learning from the little ones.
Make sure you use these money management tips or you could end up in hot water fast.