5 Personal Financial Tips for Small Business Owners
- August 10, 2021
- Posted by: Scale My Hustle
- Category: Money Matters
The dream of every small business owner is to run their business successfully and grow it to the highest heights. Yet, many business owners find it hard to keep the matters of personal and business money divided.
Managing your business finances is important for keeping your business in a healthy financial position, creating a stable financial future for your business, and helping you become more successful in your business.
Just like you would go to the hospital for checkups to help you avoid a number of health issues, so should you carve out time to attend to the financial matters of your business.
Here are some smart ways to go about your personal financial matters as a small business owner:
Never mix personal finances with business
The common saying: never mix business and pleasure might sound cliche, but it holds for every entrepreneur who has high hopes for their businesses. Keeping your personal finances separate from your business is the first step to managing your finances.
Have a separate account for your business. This would make you look legit when making transactions with customers/clients, and will help you establish some business credit when seeking a loan or some sort of funding for your business. It will also make things run a lot more smoothly so you wouldn’t have to beat yourself up when it’s time to file for taxes.
Pay yourself a salary
“Do I get to receive a salary from my business?”
Yes, you would. How else would you reap the benefits of being a business owner? You can’t dip your hands into money meant for the business each time you need to go to the grocery store or buy fuel for your car. Pay yourself a wage – enough to live on – for your hard work and let the money be in a separate account. You can start small and increase it as the business grows. Remember that one of the reasons you started a business is to help yourself financially. Compensating yourself is the best way to accomplish that.
Create a budget
Small businesses crumble and fail when there’s a lack of an effective planning process. One of the most crucial elements of a planning process is budgeting. Businesses that make a budget are most likely to be successful. Every member of the team understands the priorities of the business, no one purchases on impulse, and everyone ensures that money is allocated to those priorities that support the strategic objectives of the business.
A detailed and realistic budget will help you save money for a rainy day, monitor your expenses, and help you make better financial decisions for your business.
Explore some funding options
Don’t be afraid to take loans or ask for help from family and friends. A small business needs an influx of cash to help it stay afloat and boost its cash flow. Else, there might be some challenges in acquiring some equipment and paying your employees and suppliers on time. Running out of cash might cause any business, no matter how big, to die.
Also, seek advice from financial experts and advisors on best practices to manage your personal finances as well as your business finances.
Cultivate good financial habits
Forming good financial habits is for your business’s financial success. Your financial habits as a business owner are responsible for the financial stability of your business. Be sure to ask yourself if your office really needs a new coffee maker or will the old still work perfectly fine? You must be able to account for every penny that you make and make sound financial decisions when spending them.
If you’re not strictly accounting for every penny that you make, it can be easy to start spending money on auto-pilot. When you do this, you may be making ends meet, but by overspending, you’re likely losing out on an important planning opportunity, says Phoebe Story, M.S., a financial advisor at Northwestern Mutual.
“When you develop good habits around money, you’re allowing yourself to have a long-term plan,” Story says. Being intentional with how you spend and how you save will ensure that you’re working toward your goals, both short- and long-term.
Featured image: istockphoto