You want the smoothest path possible when it comes to growing your business and boosting profit. Your financials can turn into a nightmare if you aren’t monitoring them, and it can be tough to avoid mistakes when the workload is overwhelming. Thankfully, you’re in luck – there are simple ways for you to dodge those potholes and keep your business running on solid ground.
When figuring out how to keep your business finances organized, the first thing to do is to keep personal and professional expenditures separate. Emerging entrepreneurs should avoid using a personal credit card for expenses pertaining to their business. If your business doesn’t do as well as anticipated and you start to fall behind on your credit payments, then your personal credit rating and ability to borrow will suffer.
If you are unable to pay off your personal card balance, it will start hurting your own credit score. If your credit score lowers, it will affect all your financial transactions, both business and personal. Keeping your accounts separate will make it easier to manage your money and help bold the line between your personal and professional life.
This is also true when it comes to keeping financial records. You’re at risk of devaluing your business by increasing your perceived expenses and thereby reducing your profit margin. Do yourself a favour by separating everything in the beginning when it comes to your business and personal finances. This might mean you will have to live on a modest salary to keep above water, but it will pay off later.
Keep in mind that just because people are talking about your business doesn’t mean you are successful and growing. This doesn’t portray an accurate business forecast, even if it does serve as a confidence booster. Balancing sales figures with your expenses, profit margin, and average revenue per customer gives deep insight into how your business is performing.
You won’t seem cynical by planning for the worst. Your boundless optimism is wonderful and you need to it make a good business. But you also have to cover your bases and look to the future. Remember, you want to avoid financial nightmares-not wait for them and then figure it out. Plan for possible financial hiccups so that you will be prepared to handle what comes your way and thus move on more quickly.
It is recommended to pad your budget with a 10 percent contingency fund. No matter your estimated annual budget, that 10 percent will be there from the start. Better to have it and not need it than the other way around.
If you’re operating out of your house, the standard homeowner’s insurance policy won’t likely cover your business, especially if your business owns expensive equipment. Cover your business properly and sleep easier at night.
Don’t fall into a financial pothole. Research and learn, ask others for advice and make sure you understand the full scope of your financial requirements.
Do you feel like you’re ready to get started? Make arrangements to speak for free with one of our franchise consultants. FranNet is a franchise consultant company with a great track record of assisting individuals on their path to business ownership.