Entrepreneurship can be a personally fulfilling journey, and with the right skills and proper knowledge, it can be a financially rewarding one. However, many people don’t realize that the freedom of earning money on your own terms comes with the responsibility of organizing it in a way that best serves the needs of yourself and your business. Keep reading to learn a few helpful tips for managing your finances as an entrepreneur.
If it’s your first time running a business, you may find it challenging to organize records and taxes. These records need to stay organized to avoid legal trouble or fines. Adequately kept records can also indicate whether changes need to be made. One helpful tip is outsourcing an established bookkeeper or accountant who can do the number crunching for you, saving you time and stress.
Many business funds come directly out of your pocket as an entrepreneur. Thus, you must clearly separate your personal and business expenses. Establishing a divide between both categories will prevent potential issues of withdrawing business funds intended for personal needs and vice versa while maintaining a financial balance of work and play.
Ensure that you create a separate bank account for your business as soon as you start your company. Additionally, to ensure you allocate enough of your income to personal funds, pay yourself a set amount each month. Finally, establish a legal identity for your business, categorize receipts, and create a logging system to separate expenses and verify no payments have been missed.
Being an entrepreneur can be an exciting experience, allowing you complete control of your business and earning potential. However, with these freedoms comes twists and turns in the road, especially when you’re first starting out. While some months can produce great earnings, others can bring little profit— or even put you in debt. Thus, it’s essential to plan for the unexpected by having an emergency fund dedicated to your business. Like a personal emergency fund, ensure that your business fund has enough money to support operational expenses for up to 3-6 months.
Entrepreneurship involves constantly learning and growing and newfound responsibility in managing finances for your business. To financially stay on track to reach your goals, you must stay updated on the skills and knowledge necessary to manage your money efficiently and adequately in an ever-evolving landscape. A significant first step is consulting with a financial advisor who can help ensure you follow best practices to get your endeavor started on the right foot. Additionally, consider taking advantage of the thousands of educational resources available for entrepreneurs, such as free podcasts and blogs, books, and webinars.
Check out our previous blog post on Tax Tips for the Self-Employed. In addition, if you need personalized financial advice, our team is always here to help—contact us today to book an appointment!