4 Financial Hacks For New Entrepreneurs

If you’re like most new entrepreneurs, you’ll rank “managing finances” firmly near the bottom of your “enjoyable tasks” list. It’s a daunting job, but it’s crucial for the success of your business. Here are four of our top tips to help new business owners better manage their finances:

1. Separate business and personal finances. Often new entrepreneurs are so eager to get started, they skip over the tedious but essential groundwork of starting a business, such as setting up a separate bank account for business income and expenses. You and your business are separate entities, and the money your business makes is not your money (at least not until it’s officially distributed to you as income.) Having a designated business bank account makes it easier to track your income and expenses, file your taxes, manage your cash flow, and make informed decisions about your business. If your business is not fully established or registered, you can open a separate personal account in the interim.
   
   
2. Recognize that cash (flow) is king. An unfortunate truth is that most businesses fail because they run out of money. Cash flow is how much money a company takes in from its regular business activities versus how much it expends. More cash coming in than going out means the cash flow is positive. When the opposite happens, the cash flow is negative. A business is considered healthy when its cash flow is positive for an extended period. Businesses can tactically manage their cash flow by requesting quick payment terms on outgoing invoices and negotiating extended payments terms on incoming invoices. Additionally, businesses can pay bills strategically, study their cash flow patterns, and cut unnecessary spending.  An authorized overdraft on your business bank account and a business line of credit can offer a cushion in those unavoidable months when cash outflow is greater than cash inflow.
   
   
3. Plan for taxes. When you’re an employee, your taxes are generally deducted directly from your paycheque by your employer. When you’re an entrepreneur, you’re responsible for paying your own business AND personal taxes, plus managing your businesses’ sales tax. Make sure you plan for your tax obligations, including setting aside funds to pay them. This is where the help of a good bookkeeper and accountant can be indispensable.
   
   
4. Leverage technology to save time and money. As a new entrepreneur, you may not have the resources to hire a large staff or invest in expensive software. However, there are many affordable and even free tools available that can help you streamline your business operations and save time and money. For example, you can use project management software to keep track of tasks and deadlines, social media management tools to schedule posts and engage with customers, and accounting software to manage your finances. Some popular free or low-cost applications include Canva for graphic design, Wave for invoicing, and Meta Business Suite for Facebook and Instagram management.
   
   

Starting and running a business can be exciting, rewarding, stressful, and overwhelming—all in one afternoon! Amid the chaos, managing your finances can easily become the first thing you procrastinate. However, staying on top of the numbers and managing things correctly from the beginning can save so much headache in the long run. It can also make your business far more attractive to lenders, investors, and potential buyers. The ABCU team of business advisors is here to help. Reach out for more advice and solutions on business financial management, including cash flow, lending, credit, and banking solutions. Call us at: 1-888-929-7511.