It’s easy for first-time entrepreneurs to overlook proper money management. After all, there are a million important things competing for your attention as you work to set up your new business. But getting your financial management wrong in the early days can put your business in a difficult spot before you even get started. Here are six money management tips that can help set your new business up for long-term success.
1. Set a clear business plan
The success of your business begins with a detailed business plan. This will not only provide a road map for the development of your business, it will also give you a blueprint to create accurate budgets. Use your business plan to prioritise your costs, and don’t spend on unnecessary expenses in your early days of operation.
2. Practise realistic budgeting
Setting unrealistic shoestring budgets for your new business can be just as damaging as inflated budgets. Set clear short-, mid- and long-term goals for your business and budget for the specific resources you’ll need to achieve each of them. But be mindful that under-resourcing can carry the risk of restricting your business’s true potential.
3. Don’t overcapitalise
On the flip side, you should be careful not to spend too much too fast. While the big office, company car fleet, and full-time executive assistant may all be tempting, you should stay focused on the necessities you need to launch your operation. You’ll have plenty of opportunity to expand your business once a steady cash flow kicks in. Until then, it’s wiser to keep your expenses on the down low.
4. Protect your cash flow
Overcoming poor cash flow is one of the big challenges many new businesses face. Firstly, it’s important to recognise that it may take time for profits to start rolling in and ensure you have enough startup capital to get you through. Putting a good accounting system like QuickBooks Online in place will help you to stay on top of your accounts receivable and ensure your clients are paying you on time.
5. Find supplementary revenue
As the saying goes, it might be best not to put all your eggs in one basket. That’s why it can be a good idea to source supplementary revenue streams. These can support your main income and help safeguard your new business against unforeseen market changes. For example, you could seek partnerships with complementary businesses, or other industry sectors and additional markets where your expertise may be relevant.
6. Prepare for tax time
It’s vital to keep a close eye on your tax commitments and avoid a large, unexpected bill come tax time. Accounting tools can help you monitor and manage your tax responsibilities throughout the financial year. Alternatively, you could speak to an accounting expert to ensure all your tax reporting processes are in place and up to scratch.
While money management may not be the most interesting part of setting up your new business, it’s a vital skill set for first-time entrepreneurs. Ignore it and you’ll run the risk of leading your new business into financial distress. But get it right and you’ll have a strong foundation to underpin your long-term success.