Starting a new business is exciting, especially when ideas and enthusiasm are blazing. But don’t let the excitement make you forget about one crucial aspect: how to manage your finances. Managing cash flow from the start is key to ensuring your business doesn’t stagnate.
If you feel like your business finances are still mixed up with your personal needs, now’s the perfect time to get organized. Managing your business finances from the start can help you focus on your business.
How to Manage Finances in the Early Phases of a Business
Finances are a crucial business pillar that shouldn’t be overlooked. Unstable cash flow can hinder a business’s performance. Therefore, every business owner must understand how to manage finances properly when starting out, including:
1. Separate Personal and Business Finances
The first step is to ensure your business and personal accounts are separate. Many aspiring entrepreneurs still use the same account for both purposes. However, separating them makes bookkeeping much easier.
With a dedicated business account, you can clearly see your income and expenses. This way, you won’t be confused when preparing monthly financial reports. Your business will feel more professional.
2. Record All Expenses
Small expenses often cause business finances to leak without you realizing it. So, be sure to record everything, because no expense is considered trivial. To make things easier, you can use a POS (Point of Sale) app. Automatic recording will certainly simplify transactions and ensure they’re neatly recorded. So, there’s no need to worry about missing any expenses.
3. Create a Monthly Budget
The next step in managing your finances is creating a monthly budget, which will serve as a guide to keep your business under control and prevent financial losses. Create a budget tailored to your business needs, from operational costs to promotional expenses. This way, you’ll know how much income you need to set aside for business development.
4. Set Financial Targets
To maintain a positive attitude toward financial management, set clear financial goals from the outset. These goals don’t have to be ambitious, but ensure they’re realistic based on your business situation. With the right goals, financial management becomes more focused and motivating.
For example, a monthly turnover target or the number of new customers. Having a target allows you to focus more on allocating business funds. Furthermore, targets can motivate you to continue growing.
5. Operational Cost Control
The early stages of a business are often full of unexpected expenses that can wreak havoc on your finances. During this time, you need to be smart about choosing which expenses are truly essential for business continuity. Avoid impulsive equipment purchases to ensure funds are secure for essential needs.
Evaluate your operational expenses monthly to identify areas where you can cut costs. The saved funds can be redirected to promotions or product innovation to further grow your business. This approach allows for more targeted spending without sacrificing business quality.
6. Avoid Consumer Debt
Debt is fine as long as it’s used for productive purposes. Debt used for consumer goods can backfire on business finances. Whenever possible, use your own funds for initial operations.
If you must take out a loan, make sure it’s for a clear purpose. For example, to purchase necessary production equipment. This way, the proceeds from the loan can be reinvested into income.
7. Use Invoice App for Billing
Regardless of the type of business, invoices are a must. Invoicing makes the billing process more streamlined and professional. Clients will also have more confidence if payment arrangements are well-organized.
Use the Invoice app to make sending digital invoices easier. Besides saving time, you can also monitor payment status in real time. So you’ll never forget a bill again.
8. Make Financial Reports Regularly
Creating financial reports isn’t a daunting task if you do it regularly. These reports can serve as a valuable reflection and provide a relevant overview of your business’s condition. Everything from profits and losses to unexpected expenses can be clearly seen.
With organized reporting, you can more easily make future business decisions. Don’t wait until everything is in disarray to realize your losses. Make it a habit to evaluate your reports at least once a month.
9. Set aside a business emergency fund
It’s not just personal finances that require an emergency fund; businesses do too. An emergency fund will be invaluable in the event of sudden disruptions, such as production equipment breakdowns or unilaterally canceled orders. The amount doesn’t need to be extravagant; 5-10% of monthly net profit is sufficient.
10. Evaluate and Adjust Financial Strategy
Don’t forget to regularly evaluate your financial strategy to understand your overall financial condition. This evaluation will help you more easily adjust your budget and targets to reflect current business conditions.
Through regular evaluation, funding allocation becomes more targeted and aligned with business development. Don’t hesitate to abandon old methods if they prove ineffective. A business that has mastered its current situation will naturally grow faster than one that is stagnant.
Learning how to manage finances in the early stages of a business requires diligence and precision. However, once you get used to it, you’ll feel more at ease running your business. From separating accounts, tracking expenses, to using invoicing and reporting apps, these are all essential steps.
To make things easier, you can use the POS Cashier feature for your F&B or retail business. Labamu is an app you should consider. Its comprehensive features ensure more focused business operations, so you can simply think about future strategies to keep your business relevant and profitable.
Labamu offers features like POS cashier, invoicing for service businesses, and more organized reporting. Don’t hesitate to use the Labamu app!
