Business owners aren’t all financial experts: and it’s unreasonable to expect them to be. That said, they make the bulk of decisions which impact the business so maintaining oversight and planning is essential (for their professional and personal lives!). Here are five of the biggest pieces of advice financial expects give to entrepreneurs and small business owners to keep their finances in check.
As businesses grow, their founders tend to hire those with the skillsets they lack – the goal is to build up a balanced team of people who can help the business grow. But if you’re not at the point where you can hire a financial advisor (and even if you are), it’s important to sit down and map out a clear plan for your financials.
What would you like to achieve? How much money would you like to save? Being aware of what your objectives are will help you make the right decisions now for a long term pay off. If you can, sit down with a financial consultant and make those plans together – after all, having an action plan will help you reach those goals faster and more efficiently.
Having financial objectives will help you streamline your business and personal objectives.
No financial plan is complete without a set budget. The best place to start is by tracking your current expenses. Have a look through your bank statements and bills to identify where you’re spending your money, and how much of it.
It’s good to break this down into different categories, such as utilities, rent, and payroll.
For your budget take both your business and personal expenses into account, as this will help you identify any extraneous spending.
Many use a 50/30/20 approach when it comes to budgeting: 50% of their income to needs, 30% for wants and 20% for savings. By identifying what you’re currently spending and where you’d like to be putting your money, you can make and track the changes you need to.
Retirement! It might sound mad now, but it’s never too early to start paving the way to a smooth retirement. Think about the financial goals you’d like to have met by then – such as paying off a mortgage or having investments, and start taking the steps to realize them.
Having a savings plan that’s set up with retirement as an intent is a wise move: by putting your savings in an account where they’ll grow without intervention (and are off limits to spend!) you can save yourself a headache down the line.
It’s also wise to start a 401k plan at your business and use it for your own advantage – which can help you reach your retirement goals quicker and keep you motivated to save.
Depending on where you live, you can avail of a number of small business supports, grants, and systems – take the time to research what’s available for businesses in your region.
While managing financials can be stressful, don’t fret – there are plenty of online resources which can guide you further, and professionals you can meet for consultations. But building a formal business plan, setting financial savings and spending goals and thinking long term can be an excellent first step in your financial planning.
- Lena Klein