Last week, I was invited to speak to a group of new entrepreneurs about managing business finances. I was so happy to help them learn the importance of getting control over and understanding their finances so they can grow their business.
This group shared the same concerns that I often hear from business owners – How do I keep my finances straight? When should I start? What tools should I use?
In general, entrepreneurs have better control and understanding of their finances by taking these three steps:
1. Separate Business and Personal Finances
Open a separate business account to avoid commingling personal and business funds. Don’t wait – open the account before incurring any business expenses. Apply for a business credit card to avoid putting business expenses on your personal credit card. Separating personal and business finances makes your progress more visible and helps to show that it’s a business, not a hobby.
2. Track All Financial Activity
Maintain a record of all business income and expenses. Expenses should be tracked by category, such as rent and advertising, so that you know where your funds are going. Many automated tools are available to help track business finances. Look for one that is simple to use and meets your needs. The most important thing is keeping records up-to-date.
3. Plan and Monitor
Even without a formal budget, you need to plan for monthly and annual income and expenses. Having a plan for your finances helps to prioritize your business activities and provides a baseline to monitor your progress. Didn’t meet your plan? Don’t see it as a failure; it’s an opportunity to assess your plan and adjust your activities.
Last week’s entrepreneur group said they learned a lot about business finances from our discussion. I was gratified to hear that the information I shared helped those new entrepreneurs get control over and understand their finances. Plus, it was a lot of fun. What could be better?