Running your own business can be incredibly financially rewarding once you have gotten through the first twelve months or so. Unfortunately, many businesses don’t last this long, and cash flow can be a major factor. Here is a guide to managing your business finances when you are setting up a business.
Start with Enough Capital
As well as having enough money to buy materials, rent office space, and install equipment such as computers or machinery, you also need to think about your own living expenses. The chances are you won’t be able to pay yourself for the first 3-6 months and you will need to make sure you have enough capital to pay your living expenses until the money starts coming in.
Speak to Your Bank
It is important to set up a business bank account when you start your business as this means that you can keep your business money separate from your personal money. If you establish a good working relationship with your business bank from the start, they might be able to help you in other ways too. A business credit card is a fantastic way to pay for some of your expenses when you start as this will not need to be paid back immediately and it will give you a little breathing space. A business banking loan is a terrific way of paying for some of your costs and expenses during the first 12 months too but make sure you have enough money to make the repayments.
Hire an Accountant
You should also hire a great accountant as soon as possible. You may think that you don’t need one until your first taxes are due. However, an accountant will be able to help you set up your company in the most tax-effective way and they should be able to save you more money than they cost you by making suggestions you hadn’t thought of and helping you run your business more efficiently. A local accountant will be able to meet with you more easily if you need some advice face-to-face. For example, search Kent Accountants” online if this is where you are based.
Don’t Let Invoices Slide
It is all very well doing all this work and taking on clients but if they are not paying their invoices then this can cause you financial problems very quickly. Non-payment of invoices is one of the top reasons why small companies go out of business, so you need to keep on top of them. You should send an invoice as soon as you have finished the work as this will hopefully mean that you will get paid for it more quickly. Don’t be afraid to chase up unpaid invoices and remind people that they owe you money. You don’t have to be pushy but if these invoices don’t get paid then neither do you.
Only Pay for the Things You Need
To keep costs down over the first 12 months you should only pay for the things you need. For example, although it would be lovely to have a massive office space in a nice part of town, if you will be working alone for the first few months until you can afford to hire staff, then you won’t need it. As a one-person company, you could work from home or rent a small office space that won’t cost you a lot. Once you start to expand you can think about upsizing.
You can rent rather than buy a lot of equipment to start with. This means that you can pay for it monthly rather than having to pay a large amount of money upfront. You may find that you don’t really need something, and it was a waste of money to get it. Alternatively, you might find that you use it a lot more than you thought, and you can put it at the top of your wish list rather than wasting money on something you don’t need as much.
Being frugal is incredibly important when you start up a business and there are ways to cut costs such as shopping around for the best deals on utilities and essential supplies. You can also utilize video conferencing which could save you a lot of money on travel costs. Many companies prefer to work this way these days so they might find it better to do business with you if they don’t have a face-to-face meeting.
Follow this guide to help you manage your finances when you set up a business and hopefully your company will last for a long time.