Frequently entrepreneurship is made to sound like it is great. You get to make your own hours, you do what you want, and you are your own boss. That is a can be true as some actual pros of being an entrepreneur. However, one of the big things that people leave out of the fairy tale version, is the fact that entrepreneurs often mismanage their money.
In the beginning, often times they have to manage their own money because having an accountant is usually out of the budget. There is nothing wrong with handling your own finances, but you have to make sure there are systems in place so to eliminate financial downfalls and promote financial growth in the business.
Many entrepreneurs start off either by not reinvesting money back into the business, not separating business from personal, or incurring more expenses as they make more money. Doing all of these can lead to a financial downfall. Not having a handle on your money can lead you to saying, “the business is stressing me out” “I’m not making enough money”, or “It is always something.” Frequently it is due to bad money. To avoid financial strife, apply these 2 steps.
- From the beginning, have separate accounts. There is no way to tell if the business made money if you are always commingling personal and business funds. Even if the business only made $10, you are able to see it clearly what was made and understanding the money in the business.
- Put money back into the business. You have to make sure you have a business fund. It is important because you are able to cover business expenses when needed. If you are constantly spending everything you make outside of the business, you will constantly be scrambling to stay afloat or grow your business. Pay attention. If you made $500 in sales, it does not mean the business profited $500. Take out what it took to make the $500 in sales and put that amount back into the business. What is left over is actually the profit.
Take the time now to start handling money correctly so that the business can take care of itself. If you are always mixing your money and spending every dollar you make, you will constantly get the same results. There are so many stressors that come with being an Entrepreneur, don’t let money mismanagement be one of them.