Starting a new business can be equal parts exciting and terrifying. The opportunity to call the shots, be your own boss, and build something for yourself is definitely empowering for those of us feeling more than ready to give up a traditional 9-to-5.
But running a business just doesn’t require having one great idea. Business concepts aside, you also need to invest in growth strategising and building towards something sustainable. It sounds simple, but it can get overwhelming looking at everything on your development checklist while also handling day-to-day operations.
One facet of business admin that stumps a lot of entrepreneurs is money management. Luckily, you don’t have to be an accountant to keep your books balanced. Following a few practical habits can help you manage cash flow, reduce stress, and build a thriving, reputable business equipped to achieve all its goals and objectives.
Protect your cash flow and assets
Risk management is key to the longevity of your business. With robust risk planning, entrepreneurs can make sure any foreseen (or even unforeseen) events can be managed swiftly and with minimal financial losses for your business.
Naturally, adhering to legal and compliance requirements is a must in protecting your cash flow, namely for reducing risks of getting hit with hefty fines. But insurance is another facet that you definitely shouldn’t neglect.
Note that there are different types of business insurance policies, meaning you’ll need to do a little research to find what insurance products will be most suitable to your business. For instance, if you’re offering professional services like consulting services, professional indemnity insurance will be a good investment for your business.
Similarly, if your business has any high-value assets like specialised equipment (e.g. industrial printers, office tech, trades tools etc.), or even company cars, then you’ll need to invest in equipment insurance and business car insurance.
Pro tip: Conduct regular risk assessments to ensure your business insurance stays up to date. Emerging risks and investments into new assets may require entrepreneurs to re-evaluate their coverage.
Establish a ‘rainy day’ fund
Of all the many lessons in business and nuggets of wisdom passed down from girl bosses of days gone by, one of the tips we see popping up time and time again is to always keep capital on hand. Knowing your estimated monthly costs and ensuring that you are retaining at least three months’ worth of operating costs at any given time, can help entrepreneurs keep the lights on during any slow periods, client churn, or unexpected repairs, tech upgrades, and other expenses.
For solo founders that are still working as a team of one (and thus, only having to worry about paying your own salary), your rainy day fund also provides you with a little flexibility to invest in growth planning over revenue building.
If you’re in a phase where you’re still chasing up leads and finetuning deals, for instance, you don’t have to put time-intensive demands on prospective clients and can focus on building a strong relationship backed by a values-driven approach to managing their business.
Keep your personal and business funds separate
This goes without saying, but the messiest financial structure any business can have is where personal spending gets roped in with dedicated business accounts.
Not only is this a nightmare scenario come tax time, but it can also make it a lot harder to accurately gauge your company spending month to month. And with inaccurate estimations of your company spending, calculating your profit margins and other vital figures will naturally also get a lot harder.
The best way to prevent this mishap is to open separate accounts for all your business banking (e.g. invoice processing, business expenditures, salaries, etc.). Besides making the business feel ‘real’, having official bank accounts allows you to track your business’ overall performance and helps you understand how much your business is actually earning. The separate accounts keep an accurate record of your financial reports and protects you from any personal liabilities.
Getting into the habit of using different cards and accounts will ultimately help to avoid muddying tax deductions and profit visibility.
Always budget and avoid unnecessary spending
This is when having separate funds becomes incredibly handy. Some budgeting tips that you should definitely seek to implement are outlined below:
- Track everything that comes in and out of your business account weekly.
- Always stay informed with your fixed expenses and what would be recurring spending.
- Know the difference between your fixed and variable expenses and try to forecast at least one to three months ahead – this is how you’re going to budget from now on.
- Use a budgeting application (or even an Excel sheet) to track purchases made on your business account.
Using budgeting logs lets you maintain a practical approach to cutting down on your expenses. Detailed spending logs may also be beneficial in watching for any seasonal dips or slow-paying clients.
Be strategic with your investments
It’s easy to feel pressured into spending money as an entrepreneur. From SaaS sellers to business course peddlers, there are always going to be entities projecting their marketing messaging to you.
But the smartest investments are the ones that will make running your business easier, more stable, and more sustainable. That could look like accounting software, better security infrastructure, admin support, and anything that will support your business in the long run.
The best way to plan out your business investments is to establish a priority expenses list, based on the estimated return (ROI) of each prospective investment. Will business insurance help you save money? Yes. Will an AI admin help you save on time, which maximises your available time throughout the week to broker deals? Yes.
Not all business investments are the same, so don’t treat decision-making for each investment like a standardised process. Let yourself think about where your money is going, and how it may feasibly return to you again with each and every investment you line up.
Plan for the long term
Ask yourself: where am I planning on taking this business in the future? What goals do I want to reach? What’s the social impact I’d ideally like this business to hold?
Managing your finances means planning ahead and doing research on customers, business growth, and exploring your market. Even if you’re only just starting out, think about long-term goals such as talent acquisition, expanding your store or service offerings, or any potential growth strategies to keep the business relevant and dynamic.
Set yourself up for success as an entrepreneur
All things considered, financial management is an ongoing process, not a one-time setup. You just need to create consistent habits that will support your growth for your long-term business goals.
Remember that for entrepreneurs, financial confidence is one of the most valuable foundations for long-term growth. So build with intention using the tips we’ve outlined above.
In doing so, you’ll no doubt cultivate a strong impact both within your market niche, and across your wider professional network.