Any entrepreneur – young or old – needs to know how to properly manage his or her finances. Making purchases, paying employees, keeping cash flowing and properly managing accounts is what keeps a business afloat. Ensuring that all of these things are done properly must be a priority. If that means hiring a bookkeeper, an accountant, and a payroll person, so be it.
That doesn’t mean, however, that you can wash your hands of the whole issue; you still need to perform some basic money management duties.
Hire a Lawyer
Even though a lawyer won’t have much to do with your money management, he or she will still help with the other basic elements of your business. Your lawyer will help you decide what kind of business entity you operate as. This decision will affect your existing plans and your goals for the future, as well as the type of taxes your business have to will pay.
Open a Bank Account
After you’ve decided on a business name and have it registered, you should open a commercial bank account. Find a bank that ticks all of your boxes and call to make an appointment. When you go in, you’ll need your own personal identification as well as your business registration paperwork.
You’ll need to deposit money into the new account immediately; the amount varies so be prepared to deposit up to $100 or more. If your credit is good, you can also apply for a business line of credit, debit account, credit card merchant account, and any other small business services the bank may offer.
Track Your Finances
If you do not want to hire an accountant (even though it is highly recommended that you do) you should purchase accounting software to track all of your income and expenses. If you don’t know where your money is going, it’s harder to manage your business.
If you don’t know how to use the software properly, you should think about hiring a bookkeeper to deal with your finances on an ongoing basis, and also a chartered accountant to prepare your quarterly audits, year-end tax returns and business statements.
Set business goals when it comes to finance. Divide your goals into short-term (monthly profits, monthly savings, budgets) and long-term goals (net worth of the business).
If you run any kind of service business you should always ask your clients for a deposit before you provide any services. This is especially important if the service you provide requires you to pay up front for products. At the very least, the deposit by the client should cover the cost of the materials.
If you’re supplying only labour, a deposit of between one-third and one-half of the total amount of the contract, paid up front, is recommended. This deposit information should be clearly outlined on the contract or order form, as well as your refund policy.
At some point every entrepreneur will run into the situation where a customer will not pay in full or will be late paying their bill. So you need to know how to effectively collect debt. First of all, keep communication between you and the client open, and make sure you understand the laws when it comes to how and when you can communicate with delinquent clients. You may also hire a collection agency to do this work for you. Your third option is to take the delinquent client to small-claims court.
Enforce a Strict No-Splurge Expense and/or Travel Policy
If your employees have to travel or entertain for business, make sure that overpriced hotel rooms, plane tickets, and meals don’t end up on the company’s credit. Institute a written policy that states anyone using the entertainment or travel slush fund must search for less-expensive alternatives or discounts.
If you’re a start-up entrepreneur looking for money management tips, there are always things you can do to help save your business money. You’ll have several allies in this endeavour: a lawyer, a bookkeeper, and an accountant are just a few professionals that will come in handy.