Money Matters for Today’s Entrepreneurs
Today’s new entrepreneurs must create a sensible financial plan before going into business; regardless of what a company does, it is important to ensure that the initial funding is in place before offering services or products to customers.
Financial Planning for New Businesses
New businesses are often unsuccessful because entrepreneurs fail to create a solid plan for funding their first several months of operation. When opening a business, owners should have six months of funding available to purchase inventory, pay the rent on the business space, handle payroll, and take care of incidental expenses that they may not have considered.
It is also an excellent idea to develop a system for keeping track of income and expenditures. Starting a business can be a risky endeavor, but successful entrepreneurs all share a passion for attending to large and small financial details. Whether business owners use technology to track their cash flow or they simply keep the information in a physical record book, it is imperative to ensure that the records are easily accessible and well-maintained.
After creating a financial plan and devising a record-keeping system for the business, entrepreneurs must look at the cash they have on hand; those who do not have enough money to sustain operations for six months may want to leave their doors closed until more resources are available. Successful businesses often begin turning a profit after six months, but those who run out of cash after three months never have the opportunity to attain success.
Paying Employees and Billing Customers
Many new entrepreneurs work vast amounts of hours in order to keep payroll costs low, but every business owner eventually finds themselves in need of one or more employees. Whether hiring takes place soon after a business opens or the entrepreneur waits until revenue can support a staff, paying employees is a large part of operating a company.
Obeying local, state, and federal tax laws is important; regardless of what an area’s taxation requirements are, employers are responsible for ensuring that they pay their taxes and for maintaining proper tax records. Paying employees “under the table” is also a bad idea; even if it seems easier or is the employee’s preference, failing to report an employee’s earnings is illegal.
New businesses often find themselves in the red when they first begin to pay employees, but paying an employee late is inexcusable; after all, employee retention is much easier for entrepreneurs who pay their workers in a timely fashion.
In order to take care of expenses and pay employees, entrepreneurs must ensure that their customers have paid their bills; an effective invoicing system usually keeps revenue flowing into the company. Consider charging late fees to slow payers; small percentage-based fees provide clients with an excellent reminder to pay their bills on time.
Finances are at the Heart of an Entrepreneurship
From the creation of an original financial plan to ensuring that customers make on-time payments, finances are at the heart of any business. Without the original output of cash to purchase inventory and business supplies, proprietors will miss the opportunity start and grow their business. At the core of every entrepreneurship rests an intricate balance between expenditures and income, and it is up to the business owner to maintain that balance.