Good money management is the key to success. Without it, your business could struggle and flop. And with it, your business could thrive for years to come. If you’re new to money management, here are three tips that you should start following as soon as possible:
Prepare for Emergencies
If you want to manage your business’s money properly, you can’t just plan for times when the cash flow is steady, and there are no problems to deal with. You need to plan for the rough days, too. Your business needs to be able to handle these financial hurdles to stand the test of time.
So, you should prepare for the unexpected. Take out different types of business insurance to make sure that you have added protection for your workspace, workers, equipment, products, and more. Once you’ve got the insurance taken care of, you should start building an emergency fund for problems like sudden drops in cash flow or equipment repairs. Dedicate a portion of your budget to this fund, and don’t take anything from it unless it’s absolutely necessary.
What happens when you don’t have enough in your emergency fund? You can always go to a website like CreditFresh and see whether you can apply for a line of credit. A line of credit is a useful credit tool that allows you to quickly withdraw funds within your credit limit and then replenish your balance later on. This can be extremely convenient for managing emergency expenses.
See if you meet the qualifications for the line of credit. If you get approved, it could become a good backup plan to have at the ready.
Learn about Bookkeeping
Bookkeeping is the process of recording a business’s financial transactions on a day-to-day basis. It’s essential for tracking expenses, building effective budgets, and planning any future developments.
You can always hire a bookkeeper to do this work for you, especially if you’re already too busy conducting other tasks. However, you should still learn the basics of bookkeeping to make sure that the bookkeeper you hired is doing a good job. You don’t want to be in the dark about your finances.
Learning the basics of bookkeeping can also help you spot the warning signs that something is wrong, like drops in cash flow, unpaid vendors, or missing funds. You might gloss over these things with untrained eyes. But when you know where to look, you can find the red flags right away.
Separate the Personal and the Professional
One of the smartest things that you can do as a business owner is to separate your personal spending from your professional spending. If you take out a loan for the sake of your business, don’t use the leftovers to cover a personal problem. If you want to replenish your business supplies, don’t pull out your personal credit card. Use a business credit card.
Why is that? Combining these two financial categories can make bookkeeping much harder for yourself, which in turn, will make filing your taxes more painful than it should be. Separating the two categories will simplify things for you.
Another reason why you shouldn’t mix the two is that it could affect your credit scores. Using your personal credit card to handle business expenses could rack up the balance and leave you with a lower consumer credit score. It will also make you miss out on opportunities to boost your business credit score — it’s a lose-lose situation.
Poor money management can sink a business. Follow these three simple money management tips to keep yours afloat, even on choppy waters.
Featured Photo by Matthew Henry from Burst