7 Smart Ways to Manage Your Budget and Cash Flow as a Business Owner  

As an aspiring business owner, you’re likely learning that just being an expert in your product or service isn’t enough to keep things running smoothly. You’ve probably met with problems ranging from scheduling conflicts and dealing with vendors to software purchasing and procuring licenses.

Added to that: one of the biggest challenges for many entrepreneurs is learning how to manage finances. Here’s a few suggestions to help you figure it out:

Understand Your Money vs. Your Business Money
While it may not feel like a big deal to have one checking account to run both your household and your business, you really should look at keeping things separate. When it comes to paying taxes, managing your business expenses, and budgeting for your home, it’s essential to be able to track your personal finances and your business finances individually. It can also help protect you in the event of any litigation where your assets are at risk. You don’t want to risk your house or any other personal assets if they are tied in to your business expenses. So make sure to go ahead and split these up if you haven’t already.

The Importance of Budgeting
You wouldn’t dream of getting yourself in legal trouble by getting in over your head with your business, especially if you have investors to whom you are responsible. So why would you risk your personal finances? Too many people over-extend themselves financially, with the expectation that finances will improve someday and they’ll be able to “catch up.” In reality, most of those people wind up trapped in the cycle of endless debt that plagues so many people in today’s society.

The best way to avoid this is to understand how much money you have to spend, and then keep a tight lid on it. It’s very easy to spend more than you can afford, and quickly get in over your head. But why do you feel less responsible to yourself and your future than you do to your business investors? Put as much effort into budgeting for your personal expenses as you do for your business, and you won’t wind up in that trap.

Have a Solid Emergency Fund
Once you’ve established your budget, go ahead and set up an emergency expense fund, both for your business and your home. This will keep you from relying on credit in the event that your hot-water heater blows up, or your car breaks down. Keep a steady amount in savings (3-6 months of bills worth). If you manage to save more than that, use the excess to pay down any debts that you may have incurred. Having this fund in place will also be essential if you have some leaner months with your business, so you don’t have to worry about not having the income to meet your needs when things get tight.

Know Where your Money is Coming From, and Where it’s Going
Having a working knowledge of your cash flow is essential for understanding where you’re going to be tomorrow, or next week, or next year. In other words, when you track your income, expenses, dates of large bills, or expected purchases, you should be able to predict with some certainty when you’re going to have money, and also when you may be running into trouble. Having a good grasp on your cash flow will keep you from being surprised by negative numbers in your accounts, and help you avoid them in the first place.

Protect Yourself with Insurance
It’s not just yourself you need to worry about. If you have a family and children, or even if you are in debt and have living parents, you want to make sure that you have disability coverage in the event that you are unable to work.

Also, though no-one wants to consider it, you want to be certain that you have sufficient life insurance coverage in case something happens to you. Moreover, knowing that you’ll still be able to provide for your personal expenses in the event that you lose your income is critical: short-term disability insurance is inexpensive, and can make all the difference in the world if you become injured or sick, and don’t have an employer-sponsored plan to fall back on. Lastly, also make sure that your business is properly insured, so you don’t risk losing your home or other personal assets if you wind up in any sort of business-related litigation.

Plan For Your Future
When you’re on your own, there is no employer-matching 401K account, or other automatic retirement planning. It’s completely up to you to save, to figure out your savings options, and to get it done.

Thus, no matter how tight things get, you should find a way to put at least something away each month, preferably in a tax-advantaged retirement account. While the ultimate goal is, of course, to have a successful business that will continue to pay off as time goes on, you absolutely cannot count on it when planning your future. Disasters, economic down-turns, and cost of living increases may change your business income in the blink of an eye. Don’t let yourself be caught off-guard.

Hire Professional Financial Advisors
If this is all sounding overwhelming, you’re not alone. All of these are things that every business owner winds up having to deal with, and it can be very confusing. Therefore, it may be in your best interest to hire someone to handle these aspects of your business and personal life, so that you can focus on your passions. Removing this added level of stress from your life will help you to provide the best service possible to your clients, which will increase your revenue.

Lastly, while all of this may sound demanding at first, keep your eye on the ball: remember the reasons that you chose to start your own business, and keep that passion alive!