Having a business comes with different sectors you need to take care of, and one of them is your finances. One major mistake made by entrepreneurs is mixing personal and business funds together, and this creates a lag in bringing the best experience for you as a business owner.
We've outlined 5 tips you could use in planning your finances as a business owner.
1. Develop short and long term goals.
Every type of planning you do in your business should revolve around your short term and long term goals. When compiling your business plan, ensure that it includes a detailed financial plan that aligns with your business goals.
They can be decidedly short-term and tangible, for example, saving money to buy a piece of equipment.They can also be longer-term and more numerical, such as achieving a certain profit margin over the course of a financial year. But one thing that all great business financial goals have in common is that they’re clear, measurable and achievable.
2. Separate your business from your personal finances.
As you navigate business financing, it may be tempting to use your personal finances to help out when your business needs a boost, but that is not always the best solution in the long run. Separating your personal and business finances can help ensure you treat your business like the independent entity it is, while safeguarding your personal finances. It is best to maintain a firewall between your business & personal finances. This will make your bookkeeping easier, but it is also essential for protection of your personal assets in the unfortunate case of bankruptcy, lawsuits, or audits. Also, if you seek funding in the future, strong business financial records can increase the likelihood of approvals.
3. Create a comprehensive budget for your business and stick to it.
Creating a budget helps you understand how much money you have, how much you have spent, and how much money you will need in the future. A budget can drive important business decisions like cutting down on unwanted expenses, increasing staff, or purchasing new equipment. If you end up with insufficient money, the budget can guide you in altering your business plan or prioritizing your spending on activities.
With the right budgeting plan, you can keep your business out of debt or find ways to reduce the debt it is currently facing. A comprehensive budget can even be used for obtaining business loans from banks or other financial institutions.
Your budget could be weekly, monthly, quarterly or however frequent you want it to be.
4. Learn the basics of business accounting.
This is a vital skill to have if you want to effectively run and grow your business. What is important is to be able to grasp the fundamentals of accounting as opposed to having expert knowledge.
5. Seek guidance and don't be afraid to ask for help.
"Who ask question nor dey miss road" (Nigerian slang). You can seek advice from fellow entrepreneurs or business owners for more personalized solutions. This would make you avoid mistakes that could be detrimental to your business growth.
It's important for you to research ways you could improve your earning power and planning skills. Numerous articles and resources are available for this purpose, and you could also join our community, the EBH Africa community which heavily supports peer-to-peer learning and you can connect with hundreds of other entrepreneurs within and outside your industry and learn skills that would improve your financial planning!
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