Starting up a new business begins with a great idea, but it quickly turns into a lot of hard work, planning, and above all, good financial management. Almost all new businesses start small, so here we will focus on tips most relevant to small businesses, though they could well be applied to larger companies as well.
It should come as no surprise that our tips will focus on money. Why? Because without it, your business would soon cease to exist!
Yes, the spirit of innovation, elbow-grease style entrepreneurship, a love for what you do, and a desire to provide valuable products/services to real people (your customers) are the heart and soul of your business. However, without cash flow and revenue vs profit, it’s all going to fall apart anyway.
Here are 4 tips to help new small business owners get their finances under control and make them a growth driver instead of a constant limitation:
1. Streamline Your Invoicing
Good accounting and strategic pricing can do wonders for your business financially. It can help you avoid trouble with the IRS, give you “eyes” on your true financial state so you can plan ahead, and make your business competitive. Unless you invoice well, cash flow can hold you back even when bottom line doesn’t. Check out this link on how to get free invoice templates for your business: https://www.freshbooks.com/invoice-templates
By including the right information on your invoices, sending reminder emails, informing clients in advance about potential late fees, and using ready-made (yet customized) templates for your invoices, you are likely to get paid faster, spend less time invoicing, and impress your clients.
2. Know Your Break Even Point
Straddling the border between red ink and black is the watershed known as your “break even point.” Everything before it is debt; everything after it is profit.
Take the time to calculate all of your projected and actual expenses and to track your progress toward your break-even point on at least a monthly basis. It will not only let you know where you’re at financially, but it will also be a big morale booster when you see significant progress toward your goal.
3. Double Your Estimated Costs
You want to spend a lot of time digging into the details, researching, and predicting total costs for your new startup. After doing all that, go ahead and be sure you have access to twice the money you think you need.
If cash capital, an asset you can quickly liquidate if necessary, and the credit limit on your credit cards still don’t add up to enough, you’ll need to make up the difference with start up business loans. It is far better to over-finance and have left over money that you can just pay right back than to under-finance, end up unable to get a second loan, and watch your business sink into oblivion.
4. Get Your Finances In Order First
Before you can even begin to think about gathering together the financing and other financial resources to make a new business work, and carry it to the break-even point and into profitability – FIRST, you must get your personal financial “ducks” in a row.
Make sure you pay off all personal loans, aside from perhaps a mortgage and a car loan. Then, check your credit score and find out what your business credit score would be.
Finally, make allowance to pay yourself and protect your personal assets when figuring out your overall business plan. Too many people neglect to do this and end up losing it all, not just the new startup.
Of course, there are many more good financial tips to explore, but these four make a great start. Don’t be afraid to reach out to experienced business men and women and professional business consultants and well trained CPAs to glean yet more financial wisdom to help your new business grow.