You could effectively manage your employees and influence your customers to love your business, but doing business also requires managing your finances, whether it is business or personal. Money and its equivalents should be adequately present in your business in order for it to run smoothly. No matter how talented you are as an entrepreneur and as a marketer, if you don’t know how to handle your finances, your business might still be in a big risk. Thus, you have to learn how to maintain a good cash flow in your business. The following are 12 personal finance tips for business owners and entrepreneurs.
1. Build an emergency fund.
Always set aside a reasonable portion of your income for your emergency fund. An emergency fund will help you cover your unexpected losses or expenses. It will also help you avoid selling your properties for a bargain price or getting instant but high interest loans just to get cash during emergency times.
2. Get a financial coach or mentor.
Get someone who will guide you on managing your personal and business finance, whether it’s a financial coach, a book or even a blog. You can also join several personal finance forums or groups online to keep in touch with financial experts and ordinary people who regularly share their personal finance experiences.
3. Be active in finding income opportunities
In order to have a good cash flow and cover your unending expenses, you have to consistently earn income. If you’re just starting your business, don’t be too choosy with income opportunities that are available for you as long as it is legal and ethical. Don’t waste your time waiting for big clients to come. If you are not currently serving any client, serve small clients even if you will just earn small profit. What important is that you are constantly earning and making clients happy, whether they are big time or not. Remember that if quality is not yet present, move and go with quantity.
4. Invest and diversify your income
Income can be passive, active or their combination. To reduce business and financial risks, invest your money or time in other income generating schemes that you think you can handle well. If you are only relying on active income, that is, you only earn when you work, consider building wealth that will give you passive income. Earning passive income may take time, but when you start earning it, it will be a sweet addition to your active income.
5. Understand accounting
Business owners must know and understand the language of business – accounting. They should learn how to read financial statements and assess a business’ financial condition, performance and cash flow to make better business and financial decisions. If you don’t know accounting, find a short-course accounting training for non-accountants in your area.
6. Document all your expenses
Whether they are business or personal expenses, keep your receipts or invoices and record them orderly to track all your expenses. Tracking and monitoring what you spend will give you clearer ideas on how to reduce your expenses and have a better cash flow. You could also use bookkeeping software or applications to help you track your expenses and generate reports.
7. Separate your business and personal finances.
Don’t mix and mess up your business and personal finances. A lot of business owners and entrepreneurs go bankrupt because they squander their business income for their personal desires. Remember that your business has a life too – it serves customers and compensate your employees. Thus, you have to keep it alive and financial healthy. Use your business income to grow your business, rather than just growing yourself.
8. Prioritize your maturing debts.
Financial freedom is not about having no debt. Financial freedom is about having the ability to pay your debt on or before they are due. Hence, always set aside a portion of your income to possibly pay your debts or loans in advance. Also, don’t forget to pay your taxes on time.
9. Follow the rules
Breaking the rules of ordinariness to think out of the box and create innovation is a quality of a successful entrepreneur. However, when it comes to laws and regulations of the land, every entrepreneur and business owner should learn how to adhere to avoid paying penalties and charges that will cause financial troubles to their business.
10. Get financial backup
Get financial support from the government, from investors, and even from your family and friends. No matter how talented and skillful you are, if you don’t have sufficient financial resources, your business will have a limited run. Whether you’re just starting or already expanding, create a good business plan or feasibility study to convince investors and financers to support your business.
11. Live a simple life
Learn how to be frugal and learn how to enjoy life without spending too much money. Don’t use your car in going nearby places so that you could save from fuel expenses and save our planet. Run at the park to save from gym expenses and still keep your body healthy. Avoid drunkenness, gluttony and other vices to keep yourself away from sickness, as well as to save yourself from future medical expenses.
12. Save for your retirement
You won’t be doing business all your life. We all want to retire someday and have all the time to enjoy the fruits of our labor. That is why we have to prepare for that time to come. Aside from setting aside money for your emergency fund and other short-term and mid-term contingency funds, don’t forget to set aside a portion of your income for your retirement fund.
Business owners and entrepreneurs have to pay attention to their business and personal finances. They have to strive in achieving their own financial freedom. And in order to achieve their financial freedom, they have to make sure that their personal finance works harmoniously with their business finance. Business owners and entrepreneurs should learn how to manage people in the workplace, influence customers in the market, and control money in their cash flow.