Money-Management Tips Every First-Time Entrepreneur Should Know
Being an entrepreneur sounds glamorous, but the reality entails a lot of hard work. You don’t have anyone to depend on — the buck ultimately stops with you. Mastering your money and finances is a must if you’re to succeed.
What do you need to know before a segue into business ownership? Here are five money management tips every first-time entrepreneur should know.
1. Educate Yourself
Employers handle tax matters for you. However, being an entrepreneur means reporting your income and expenses to the proper authorities, perhaps even issuing W2s to employees. It’s a heavy responsibility, and one out of five small-business owners don’t know what tax bracket they fall into. Failing to meet your obligations can result in the IRS taking everything you worked hard for, even your home and vehicle.
Among the top financial tips for entrepreneurs is to take a few small-business accounting courses, even if you plan on outsourcing your books to a professional. Learn about the U.S. pay-as-you-go system and your obligations to state and local governments. You are ultimately responsible for your accountant’s actions and should understand the basics.
Furthermore, advancing your learning in your area of expertise never hurts. The world is becoming more specialized, and each additional certification amplifies your income potential and sets you apart as an expert in your field. You can obtain many such courses online for less than you may suspect.
2. Find Startup Funding
Most small businesses require an initial capital investment to get off the ground. One of the more challenging aspects of finances for entrepreneurs is to find the funds they need to launch.
Some lucky entrepreneurs fund their enterprises themselves, starting their businesses as side hustles with money from their day jobs. However, you might be one of the many struggling with wage stagnation, and while your lack may fuel your entrepreneurial spirit, it can also make opening your doors tougher.
Please don’t despair — you have options. The Small Business Administration offers guaranteed loans and investment programs to help finance your dreams. You can also consider crowdsourcing your company or approaching individual investors for venture capital.
3. Organize Your Books
A first-time entrepreneur must keep track of income and expenses. You’ll need accurate financial records to come tax time. Plus, you’ll want documentation to support your earnings if you decide to buy a home, get a car or take out a business loan.
Your first step is to choose your preferred accounting software. Quickbooks and Freshbooks are popular brands requiring subscriptions — but it’s worth the price. You can find free accounting software that might serve you well while you remain a small side hustle, but you’ll probably want to graduate to something with more bells and whistles eventually.
Then, you need to schedule a time to keep your books in order. At the very least, you should sit down weekly to enter income and expenses and perform a monthly bank reconciliation. Consider outsourcing your bookkeeping if the responsibility takes too much time away from daily operations. You may eventually want to hire a full-time accountant as you expand operations.
4. Manage Receivables
Collecting the money owed to you for your goods and services can be one of the trickiest things for first-time entrepreneurs to master. It’s easy to decide when to bill and collect — enforcing that system often proves tougher.
Let technology be your friend. Set up automated electronic billing and consider a customer portal where clients can view invoices and make payments. Do a thorough credit check before performing labor and consider requesting full or partial payment upfront to avoid headaches if you work in a service industry.
5. Analyze and Project
What is your vision for your business, and how will you get there? The final financial tip for entrepreneurs is learning to use the tools at your disposal — namely, your records — to analyze what’s going well and make predictions regarding future growth.
You should know how to run and read a profit-and-loss statement to determine where you could minimize expenses and maximize profits. Likewise, you need to analyze future needs. Does your growth demand hire more staff? Are you considering expanding into another sector, and if so, do you have the requisite capital? Are you focusing on your personal growth and well-being as your company expands?
Financial Tips for Entrepreneurs
Being a business owner requires much hard work and savvy. You need the right financial tips for entrepreneurs to improve your chances of success.
Consider the five money-management tips above when starting your small business. Mastering finances for entrepreneurs can seem tricky at first, but others have succeeded before you — and you will, too.