Starting a new business that you are passionate about is a great feeling. But being a new business owner means there are a lot of things that you will do for the first time that you might have no experience or expertise in, like accounts and finance. If you think about it, a business is all about finances. The sources of funds you have, your budget, managing the revenue your business generates, paying off the debt, etc., are all finance-related tasks that are the key factors in running a successful business.
In America, there are 30.7 million total small businesses. But about 82% of those businesses fail. And the main reason is that these businesses fail to tackle their finances. If you don’t manage your finances, you can end up in serious debt or other complicated situations. Now think of a business and how complicated and important it is to tackle the finances of a business.
So here are four financial tips for new business owners.
- Seek Guidance:
As a business owner, you wear many hats. You have to keep a check on all the aspects of the business, like production, marketing, sales, customer relations, HR, accounting, finance, etc. Since you already have so much on your plate, it’s easy to mess things up. Plus, some things require more knowledge and experience than others. Of course, it’s easier to decide what color the packaging of your product must be as compared to handling the finances of the business. You might not be proficient in financial jargon, and handling business finances is drastically different from handling personal finances.
That is why you should opt to use the services of experts who can help you run your business smoothly. You can seek guidance from a reputable global strategy consulting firm that provides expert services. These consulting firms provide many services like strategy and growth, private equity, data, analytics, etc. These consulting firms provide data-driven solutions to your business problems.
- Create An Emergency Fund:
Any unexpected situation can unfold at any time. There are meant to be some ups and downs in a business cycle, and sometimes you cannot even predict what the upcoming business season will be like. Other than unexpected market situations, some emergencies can also take place for your business individually. That is why it is wise to have a backup for the rainy days.
You should create an emergency fund for your business because you never know when anything might go south. Surprise expenses, a downturn in the economy, events that cost too much money, a shortage of cash, etc., are a few of the things that will make you wish you had some kind of financial backup.
Every business owner experiences hurdles or setbacks in the business. Thus, it is almost certain that you will go through some hurdles and setbacks as well, but when will this happen? That is uncertain. And when such a situation comes, you should be ready to tackle it. Otherwise, stress and fear will take over, hindering your ability to make the right decisions. Especially as a new business owner, you might panic way too much in case of a financial emergency, leading you to make ineffective decisions that will only worsen the situation. That is why with an emergency fund, you will have peace of mind, and you will be able to handle any urgent situation efficiently and effectively.
- Have A Good Billing Strategy:
Ask any business owner, and they will all tell you that they have a client or customer that is always late on their invoices and payments. And you can tell how badly it affects the cash flow of a business. As a business owner, you need to make sure that you can run your day-to-day business operations as smoothly as possible. And for that, you must have consistent cash flows. But sometimes, the cash flow is not so consistent, as not every client or customer pays on time.
As a new business owner, you still need to strengthen your relations with clients, and you cannot just go about writing off anyone late on their invoices, but at the same time, you do need consistent cash flow. That is why you must adopt different and creative billing techniques or take help from a professional debt collector online service. They will help you get your debts under one roof, pay them in time, and get your finances in check.
A good billing strategy will make sure that you get your payment on time without having to call the client multiple times over unpaid invoices. For example, you can give incentives to customers to pay on time by giving them discount offers. For example, one famous and simple strategy is 2/10 Net 30. According to this approach, you offer the customer a 2 percent discount if they pay the invoice within ten days. Otherwise, they will have to pay the full amount in thirty days. You can be creative and make your unique billing strategy that ensures that there is not much money tied up in unpaid invoices that should be invested and used in growing your business right now.
- Separate Business and Personal Finances:
The most common mistake that new business owners often make is merging their business finances with personal finances. Don’t wait for your business to first generate tons of profit and then make a separate account for your business finances. It is always ideal to set up a business account right when you start your business. That way, you will be better able to understand how much money is going in and going out of your business. When you don’t separate your finances from your business finances, you will not be able to differentiate between the money you spend on recreation, hoteling, or purchasing things for your business.
Similarly, when it’s tax season or when it’s time for auditing, it will be a hassle to determine which finances are business related and which are not in case of not having separate finances. Separate business finances are the best way to avoid confusion about the real expenses of your business and keep an eye on the financial health of your business.
Having a great business idea and executing it correctly is the key to starting a new business. But to keep the business running and keep it profitable, there are other important aspects of a business that you need to focus on, like finances. The financial health of a business ensures that it will survive in the long run.
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