When it comes to business, money talks. You might have got involved in business and wanted to start your own company due to a passion, however the driving force and the reason for it is of course to make money. Often spending versus profits can be a fine line, and finance in business can be tricky to manage. We all know the old adage ‘you have to spend money to make money’, but you need to find the balance between spending and reaping the best rewards. Here are some things to consider when it comes to financing your small business.
Borrow Money Correctly
It’s not uncommon for businesses to start off in the red, as often a loan is needed just to get things off the ground. After all, you have equipment to buy, marketing to invest in, you’ll need a website, possibly an app, maybe even premises and additional staff members if you won’t be working from home. All of this costs money, which you might not have as an entrepreneur first starting out. If you do need to borrow money to get your company started, be sure to do it properly. Take into consideration any interest-free time you have, and how much the interest costs. Work out if you will be able to afford the repayments if your company takes longer than you anticipate to get started. You will also need to ensure you’re not running up any personal debt, since your business will be classed as an asset (and can therefore be seized) by creditors.
As well as careful borrowing, the rest of your money needs to be in order too, when it comes to your business finances. You will need to make sure the right amount is being spent in each area, and that you’re not overspending. Work out how much you’ll need to run each element of your business, from marketing to staff wages to materials, premises cost and more. Business budgeting software can be useful here so have a look at which programs suit you most.
Keep Good Records
Keeping good financial records is crucial as a business owner. If there are any inconsistencies, it could mean you don’t pay enough tax, this could lead to huge penalties and fines and if the government believes it has been done intentionally, you could land yourself with a prison sentence. Ditch the old manual methods and use accounting software instead, this will keep your books up to date and make everything much easier for your accountant come tax time. There are programs that will offer a free invoice template and other things that can make running your business easier too, check out what’s out there.
Expect The Unexpected
Finally, having an emergency fund can help to keep you out of trouble and in some cases prevent you having to declare bankrupt if things are quiet for a while. There are lots of potential problems that could crop up which could jeopardize your business. It could be a burglary, a fire, a flood, an important piece of equipment could stop working. Give yourself some funds to fall back on, if you’re not able to save then make sure you have access to an emergency line of credit if you need it.