When you are newly starting a business, probably, you don’t have enough finances to hire an accountant to manage your finances. However, it doesn’t mean that you can’t do it yourself. All you need is to understand which part of your business finances you need to focus on. Because you have limited time, it is more important to focus on the most crucial parts of financial management rather than doing everything and forgetting about actually running your business.
Here are a few things we suggest you focus on when starting a business, and when your time, as well as your financial recourses, are scarce.
1. Monitor your cash flow
Many businesses don’t survive because they don’t have enough financial recourses. In other words, after some time, they run out of cash, and they don’t know how to sustain themselves.
If you don’t want to come to that point anytime soon, you should start taking action now and monitor your cash flow. Track the money that’s coming in and going out of the company. How much do you earn? When and from whom those earnings come from? Where do you spend that money? Who do you pay? How much and how often do you pay them?
If you write down everything, even in a simple excel file, it will be easier for you to see if you are running out of cash or not. And, when you are aware of the situation, you will be able to make informed decisions.
2. Separate your personal and business finances
For many entrepreneurs, it is challenging to separate their business and personal finances. It seems like whatever you earn is going to your pocket anyway, and there is no need to separate anything. You just set aside some money for your current business expenses from every paycheck and keep the rest with your personal funds.
However, it is important to pay yourself from the business income you are getting and keep the rest with the business. You don’t need to cut yourself a big cheque, but you can pay yourself enough money to live and invest the rest of the business earnings back into the business to grow it even bigger.
3. Cut down fixed expenses in the beginning
As we’ve already talked that during the early stages of your business, you need to be much more careful about your finances. In the beginning, every penny counts. One of the best ways to cut spending is to minimize the number of fixed payments.
Go through your expenses, consider and evaluate each one. Are those all absolutely necessary for your business to grow? Is there anything you can cut out without harming your business growth?
A typical example is renting an office space. Many start-ups rent office space as soon as they land their first big client, or get an investment. However, the office is not always necessary at that stage. In most cases, you can wait a little more and save that money to invest in more important things that will help you grow the business, such as, for example, customer acquisition.
These are a few thoughts about what you can do and what you can focus on when newly starting a business. Of course, you will need to dig deeper into every aspect to have the maximum results. If you have any questions and would like to hear more about the topic, please leave us a comment below, and we’ll get back to you shortly after.