There is nothing like the thrill of of an entrepreneurial venture. As a professional and personal endeavor, being an entrepreneur can truly be fulfilling. However, for some, success may seem like an elusive prospect left in the hands of chance. But the truth is: sustaining longevity with any venture has everything to do with your discipline. In particular, establishing good habits in the management of your finances.
So, here are five financial practices every entrepreneur must master:
Keep Thorough Documentation
Track every last penny you spend. Record the miles you drive associated with your business. Keep on top of anything and everything that might have an associated cost or an associated gain. While the obvious reasons pertain to tax season, there are more subtle purposes to document business expenses. As you continue to grow and nurture your company, you’ll need to be able to look back on your records in detail. If you don’t track them in the moment that information is lost forever. An accurate record will help you plan the growth of your company based on solid data from your past.
Analyze Your Finances
Use the information you collect on your financial operations. Examine how your overall resources are allocated and evaluate how effectively you are spending money with an eye toward your returns. The best analysis happens with the hindsight of a few years operating. Still, even looking at your expenses month-to-month will reveal valuable information. It will also allow you to determine where your money is being put to good use and where it is wasted. Establishing a habit of reviewing financial records frequently will allow you to catch potential problems sooner than later.
Plan your business spending. Discipline yourself to create specific funds and budgets. For example, allocate specific funds for advertising, production, etc. Once money is allocated to a specific fund, don’t swap it back and forth. Treating the different extensions of your business with discipline will foster a strategic approach to the way you use your resources and foster efficiency. It will also encourage employees working in specific areas to do more with less and not expect a last-minute infusion of money to bail them out when they go over-budget.
Open a Business Checking Account
Despite the digital age’s convenience afforded by electronic transactions, maintaining a business checking account is still a good idea. It consolidates your transactions into one place, even if you use a debit card associated with the account. Also, if you’re pursuing certain industries, some vendors still prefer checks. Using professional business checks will also provide you an essential paper trail should you ever be audited, sued, etc.
Pay Yourself Last
A key personal finance principle is to pay yourself first. However, a common misunderstanding is “‘Pay yourself first‘ doesn’t actually refer to how you earn money, contrary to what the phrase implies. It refers to how to save money.” Once you start making money it can be very tempting to give yourself a solid income. But if you really want success, wait! Invest your surplus and profits back into your business while it’s growing. Wait to pay yourself until you’ve grown from a fledgling business into something sustained and consistent. Build in only enough for yourself to get by at first, then wait until your business can cut you a bigger share.
Financial discipline grants an entrepreneur longevity and success. While you need that winning idea, you also need to adopt smart, practical approaches to managing your resources. These practices will help you do just that.
Meghan Belnap is a freelance writer who enjoys spending time with her family. She also enjoys being in the outdoors and exploring new opportunities whenever they arise as well as researching new topics to expand her horizons. You can often find her buried in a good book or out looking for an adventure.
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