Starting your own business can be an exciting and challenging undertaking. There’s so much to learn when you’re in charge. One of the most important aspects being how you handle the money in your business. Watch out! Without a clear financial plan and structured accounts, your business will not succeed.
Beware these money stumbling blocks and set your business on the right financial path from the start:
- Unsteady cash flow: Money is the lifeblood of any business. Without it, you wouldn’t be able to conduct your business, make and sell your products, or pay your staff. So, it’s important to ensure a steady stream of income into your business, from start-up capital to client payments.
An important related aspect is invoicing and payment – there’s no point to a fat stack of invoices if clients don’t pay you. Put in place an invoicing and payment schedule and make a concerted effort to collect outstanding amounts as soon as possible. This flow needs to be managed correctly. Hire someone to help you if you can’t manage this yourself.
- No formal budget: Your business needs a structured budget so that you know exactly what you are going to spend on (and how much) each month. A budget will show you how much you need to earn and give you feedback on what you actually spent.
You will need to account for regular monthly bills such as rent, utilities, and salaries, as well as quarterly or annual bills such as tax payments and levies.
- Taxes, what taxes? : As certain as death (or so the saying goes), your business needs to pay its taxes on time and in full. This is important for legal and compliance reasons. If you don’t pay your taxes as per the requirements issued by SARS, your business runs the risk of being on the wrong side of the law. Don’t know what to pay and when? Work with a reputable bookkeeper and accountant who can guide you through this process.
- No contingency plan: Whatever your business, it’s important to have a money back-up plan. There are a number of factors out of your control that can impact on your business – a rise in interest rates, a change in the economic climate, political instabilities, employee strikes… the list goes on! Your business needs to be able to survive these difficult situations.
When it comes to money, as above, your business cannot survive with cash flow. If you are unable to make sales or turn a profit during times of strife, you need to support your business with savings. Work hard to build up a ‘just in case of an emergency’ fund. These cash reserves will allow you to keep in trading through the tough times.
- Thinking you don’t need help: Failing to seek professional financial advice can be the ruin of a new business. Chances are you’re not an expert in every aspect of business and you’re not expected to be. Trying to do everything yourself, especially if you lack financial knowledge, can only make your financial situation a difficult or worse one.
Working with a financial professional or accountant will help ensure you borrow, spend, save, and manage business funds cost-effectively and in a streamlined manner.
The truth is that when you’re the boss, the buck really does stop with you. So make sure you take good care of the money in your business and start out as you mean to go on. Need help? Speak to an expert and make sure you avoid stumbling blocks that could mean the end of your new venture.