Money management is something that you can learn in theory; but indeed, you need some practice to make it work. There is no subject so far that teaches you how to manage your money in the most precise way that leaves no room for error. In fact, whether you are an employee or entrepreneur, you are left to yourself to figuring out how to save, how much to put back to your capital, and how much you need to spend for your operational expenses. While some are great with managing their money, most are left in the dark.
Many of you may be clueless, and some of the advice you hear from others can be conflicting and may make you more confused than enlightened. Managing a startup can have more downfalls than success, and with not a lot of money going around, you need to make sure you are on the right path.
Still in doubt with yourself? Here are a few recommended tips for you to effectively manage your finances as a startup:
Top tip # 1: Plan expenses in advance
Think of yourself as the CEO and CTO of your company. How will you go about managing the company’s finances in the most precise and efficient way? Try to emulate your business inspiration, and think of how he/she will do the budget allocations for your enterprise. You can start with inspiration, but nothing beats careful planning on how you will disburse cash or spend your money wisely. In every business, no matter how big or small, every cent counts.
Top tip # 2: Closely monitor your accounts
Always do a regular check of your income statements and list of expenses. It will give you a clear picture of how much you have spent to how much you have earned. Keep an eye on your net worth which tells you how your income or earnings stand against liabilities and expenses. However, do not get all excited when you see a lot of monthly income coming into your business account. In fact, the more you are earning, the more that you have to save for the future.
Record each expense on a daily basis so you can see how much you have spent for the previous month or quarter. It also helps you plan and budget for upcoming expenditures. For this task, you will need a professional to do the work for you. While it may seem doable as a startup, you also want things to be correctly done so you won’t have issues with tax authorities.
Top tip # 3.: Take note of your tendency to buy or invest on impulse
It is essential to identify your needs and what needs to be done for your business’ future. Do not be tempted by attractive marketing models that may prove irresistible since you know you can afford it. A lot of these marketing models may seem grand, but when you slice them down and see them to their core, you will know that they are too good to be true.
A lot of careless entrepreneurs invest more than what they initially planned to spend on because they fall to the bait. Be aware that marketing firms hire social scientists who are experts in human behavior and psychology to increase the sales of these products and services. Do not fall prey to these tactics. Be wise and aware of what you need.
Some reminders to help you be aware:
a. Practice the one-day rule. It is best to always give yourself time for at least 24 hours before deciding to buy or invest in something. This window gives you time to think.
b. Identify the emotions you feel when reading the marketing material or listening to the salesperson. Ask yourself why the ad promises to make me happy and how it will make you think after five days, five months, and five years.
c. Use cash whenever possible for a sudden or unplanned expense. It makes you more responsible for your actions.
Top tip # 4: Make it a conscious effort to save
Talk with financial advisors on which bonds, equities, or stocks it would be generally safe to invest on. While no investment is fool-proof, if you are well-armed with thorough research, then you can be sure of where you are putting your savings. Ask an outsourced bookkeeper for financials to generate a second opinion to uncover some fiduciary loopholes. If you allow your business to run on its own, with just the simple debit-credit as its lifeblood, then you are not allowing the enterprise to grow.
Unless you are a certified financial advisor yourself, seek professional assistance to untangle unforeseen mistakes. You do not want to make costly decisions just because you don’t want to pay for the advisor’s services.
Also, avoid going for investment plans that sound too good to be true. You may regret your decision later on.
Top tip # 5: Don’t forget about your credit standing
Make it a habit to keep tabs on your credit score. The better rating you have, the better chance that creditors and lenders will be friendly to you when it comes to approving your loan application or renewing your current one, in case you need to expand your business. The credit bureau monitors this data and shares your credit information with other credit institutions. A negative credit standing can have a devastating impact on your image, so it is best to maintain functional status.
Managing a startup is far from easy, but if you have the right mindset and you want to succeed, then you will find success with your enterprise. Make sure that you are mentally and emotionally.