Everybody manages their finances differently. There is really not one-size fits all model. When you are in startup mode, there are plenty of things running through your mind.
You need equipment, marketing, a website, employees, etc.
With so much happening, new business owners might not manage their business finances efficiently
Here are 5 tips for managing your money like a startup:
1 – Create a Financial Forecast
I'm sure you have a financial budget in mind and have a concept of in which the money is going to be allocated, but developing a budget is not only understanding where your expenses is going to be spent.
You need to develop a Financial Forecast Model so that you can measure your expenses vs your revenue to make sure that your company can and ultimately is going to be profitable, especially in the initial phases of the business.
Most startups might run at a lose the first year or two. So develop a one and three year financial forecast. By doing this you'll be able to see how your company's profits can go from the red to the green.
It's also important to measure your expenses against your potential revenue. Far all too often start up business owners neglect to connect these dots when creating a budget. Ultimately leading to that business failing.
2 – Separate Business and personal Accounts
As a business owner, it's important for you to keep your personal and business accounts separate.
You should have another business banking account and business credit cards. When spending money just use funds from the business banking account or credit card for business related expenses.
Keeping these accounts separate will help you to manage your taxes more proficiently. This will make it easy for the accountant and also the IRS to determine the main difference involving the personal and business accounts.
Plus in case your company is sued, it'll lower your legal liability and protect your personal assets.
3 – Consider consultants rather than employees
Consultants are a great way to get the results without the extra cash.
Need to work on advertising?
Need a website developed?
Want someone to manage your books?
Hire an advisor and save yourself the requirement for Worker's Comp Insurance, sick days, vacation time, etc.
New hires can cost your company typically $5,000 per hire, that's along with their salary/commission. Consultants are less expensive overall and can provide stellar recent results for your business.
4 – Don't outsource too soon
I know what you're considering, “You literally just told me to outsource.”
I know I did. But there are a lot of products that you can do on your own before you outsource.
Do you've some experience in marketing and it doesn't drain your lifetime? Try it yourself before outsourcing.
Can you balance your money flow? Look into accounting software to help with this particular task.
Need anyone to handle your schedule? Use Google Calendar to set appointment times (yes, you are able to email your availability out to clients via Google Calendar).
If you're capable of doing it also it doesn't add frustration to your life, do-it-yourself until you're ready to outsource.
5 – Don't undercharge
This is a very common trouble with startups.
As new entrepreneurs, you want to undercharge so that you can construct your subscriber base and generate sales. However , undercharging leaves you under profitable and clients are not as likely to spend again should you up the pricing drastically.
Undercharging will have you playing financial catch-up for many years and no one wants that.
Avoiding these pitfalls can save your company. Adopting these simple business practices might have you profitable for years to come.