When someone decides to start a business, the focus is often on how they’re going to run the business and make it work. However, there should also be a focus on the skills they need to build it successfully, and one of them is managing finance.
While some people are naturally gifted in this area, others haven’t quite mastered it. This is so important as finance skills are one of the things that could mean the difference between your business swimming or sinking. Also, you need to be able to manage your personal finances effectively to help reduce the strain that can sometimes occur during the early phases of starting a company. Having said that, find top finance tips for anyone starting a business in digital marketing below.
1. Learn the Basics of Finance
To begin with, one of the best pieces of advice that you can receive as a new business owner would be to learn the basics of finance. This is because finance is the pillar that holds any organization together and makes it possible for it to run and function. If you aren’t sure exactly what the basics of finance are, find a few below.
Budgeting: One of the basics of finance that you should learn is that of budgeting. While running your business, you’re going to hear a lot about budgets because it’s the only way to make sure that you don’t overspend and end up in deficit. This lesson can also be applied in your personal finances which you’ll need to be in good shape while your business is getting off the ground. A few basics of budgeting are understanding what a budget is, creating one, and using it to manage your money expenses daily.
Saving: When you get a good hold on budgeting, you’re more likely to get better at saving. You want to always have enough for a rainy day because when it rains, it pours. Set saving goals to help you focus and stay disciplined. These savings may be needed to survive, especially if you decide to go into business full time. When saving money, start with simple things like choosing something to save for and then deciding on your priorities. Pick the right tools to save regarding an account and automate deposits.
Investing: In addition to the mentioned, investing is another basic of finance that you should learn about. You want to have your money tied up somewhere aside from a savings account. This is so that your finances can grow and hopefully, you’ll have a decent pot leading up to retirement. As a newbie investor, explore the idea of investing in ROTH IRA or a traditional IRA. You should also want to take Warren Buffets advice and invest in low-cost index funds.
2. Separate Your Accounts
A huge mistake that entrepreneurs tend to make is merging their business and personal accounts. This can throw any business off financially and make it difficult to determine how much profit you’re actually making. To separate your business and savings accounts, avoid using your business account to pay for personal expenses and vice versa.
Opening a designated business credit card could also help if you typically make business-related purchases using your personal credit cards. One last tip would be to pay yourself a salary and use your budgeting skills to make sure you live within your means.
3. Improve Your Credit
Starting a business with bad credit may not be the best step to take, especially seeing as you may not make so much profit in the first year. Good credit, however, could make it easier to manage your financial situation, so work on getting to a good place in this respect. Here are a few practical ways that you can do this.
Pay off Debt: If you happen to have lingering debt, now would be a good time to start paying it off. To reduce the amount you owe first, find out how much exactly that is by checking your credit report and calling creditors you owe. See if you can negotiate one-off payments as it may work out cheaper and you can get the debt cleared quicker. However, only do this is if you can afford to.
Rebuild Your Credit: Paying off your debt is only a single step in the journey to improving your credit. You still need to be able to prove that you’re capable of borrowing and paying back and a way to do that is by taking out a credit card. You could try the First Premier Bank Mastercard but read the reviews on Bonsai Finance first. Be sure to keep up with payments and not spend more than thirty percent of your credit limit, so you don’t end up back in debt.
4. Generate an Extra Stream of Income
Similar to savings, having an extra stream of income can help reduce a significant amount of stress when you’re starting a business. You need to be able to survive in your personal life if money isn’t pouring out through your business and you can’t pay yourself a decent salary just yet. A way to make extra money while running a business is to offer consulting services to those who need it or write a business-related e-book and sell copies. As an entrepreneur, you have unique knowledge that people need, so capitalize on this and make it work in your favor financially.
5. Have Accounting Knowledge
You don’t necessarily have to be an accounting professional to run a business but knowing some of the basics could help significantly. You don’t want to leave the fate of your business to someone else entirely, so know how to look over a business budget and make sense of financial reports that are produced. It’s also imperative that you know how to maximize your profits by reducing expenses and keeping production costs low while maintaining quality.
Starting a business is one of the hardest and most exciting things that you can do. However, with refined finance skills, you’re more likely to grow a financially strong business which could improve your chances of success.
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