4 Smart Money Moves for New Small Business Owners
When you're a small business owner, it's easy to get caught up in the big picture of your business and forget about some of the regular expenses that go along with managing a growing company. But as any self-employed person will tell you, running a business takes time and dedication. Money management is important to make sure your job doesn't burn you out while you work towards reaching your goals.
Looking for ways to make your life as a small business owner easier? Consider the following money management tips for starting a new business.
1. Separate your business finances
Having a mix of personal and business money in the same account can make it difficult to see how much money is actually being spent. This makes it more difficult to manage cash flow and keep an eye on your business’s financial health. Remember this: Separating business and personal finances is a must for every small business owner to keep their costs under control. By creating a dedicated space in your budget, you can be sure that you’re staying on top of your finances and have a clear view of how much money you may have left over at the end of the month.
2. Reduce your overhead and fixed costs.
When you're in the initial stages of starting your business, it's important to keep overhead and fixed expenses to a minimum. The less spending you're locked into, the sooner you'll be able to bring your business into the black. As you grow your company, it’s inevitable that you’ll have some fixed expenses and recurring costs. Before committing to anything too big, take a step back and assess how much revenue your business is generating each month. It may be easier to manage these expenses if you throttle back on hiring employees or setting up an office -- but remember, if your business isn’t profitable then those options aren’t available to you in the first place. The longer we wait on these big-ticket items, the worse our financial situation gets.
3. Manage your cash flow to keep your company from losing money
To keep your business running smoothly, you’ll need to manage cash flow and make sure that incoming funding covers all costs. Your company's cash flow is a key indicator of your business's health. It can help you determine whether your funds are coming in at roughly the right rate to cover all your expenses, or if you're dipping into reserves too soon or too late. To become a successful entrepreneur, it's essential that you know how to manage cash flow so that your business will have enough income to keep running long after it has gained traction.
4. Choose the right kinds of debt to grow your business
Debt is a tricky thing. It's like a drug and it's addicting, but it involves a lot of responsibility and commitment. As a business owner, you need to know what type of debt may be best for your company and if you'll be able to handle the financial responsibilities associated with it. The right kind of debt is the one you can use to grow your business.
There are many kinds of debts available that fit most businesses. If you're looking for capital for your company, look for the best option for your specific situation. Choosing a debt strategy for your small business is an important part of running a successful organization. It is important to find an appropriate source of funding that fits your company's needs at the time and can be managed strategically by you and your team.
The best strategy of all may be to look for multiple sources of financing, including both traditional loans and other forms of private capital. And remember, you'll want to plan ahead so that no bad debts arise later in the game (especially when it comes to obtaining your first loan).
When you're starting out, it can be easy to accept having to handle every aspect of running and managing your company. But unless you have an incredible amount of time to devote to your business, take the time you need to find an accountant, bank manager, and other professionals who can help ease the burden of your job. These professionals will provide valuable insights into how you can run a more financially-sound business—and that's a business that's likely to last longer than it might if it was left in charge of one person alone.