Most owners of start-ups often have to perform many different functions themselves to keep initial expenses as low as possible, and it is not uncommon for their finances to be the one area that gets neglected.
We have put together some basic but helpful tips to ensure you are managing your finances in a way that will set your business up for success:
1. Take charge of your credit and pay your debts
Credit is the backbone of a small business and it is therefore vital that your credit is in good standing.
Paying your bills promptly will also help prevent you from spending money that should be kept aside for paying your debts.
Debt is never a good thing, so make sure you have a viable payback plan in place. It is advised to begin with debt agreements with the highest interest rates and then move on to debt agreements that have more favourable conditions.
Equally important is making sure you monitor your credit usage ratio, which is the proportion of the available credit limits that you are borrowing at any one point of the month.
2. Create an emergency fund
A typical rule of thumb is to have three to six months worth of living costs in an emergency savings fund.
Having an emergency fund will offer you peace of mind. Knowing that you and your family will be covered in the unfortunate event of a financial catastrophe, will allow you to make more confident business decisions.
3. Choose the right insurance
It is imperative that you take out appropriate insurance to cover both your personal and business assets.
A smaller company will be particularly vulnerable if it were to lose a key member of staff. This means that finding appropriate critical illness and/or income protection cover to protect you and your company should be a priority.
4. Diversify your investments You may be tempted to put your assets back into your business, but this often increases the level of risk. We suggest diversifying your investments which will spread the level of risk.
You can start doing this by investing outside of your industry.
Consequently, saving for your retirement – which should be non-negotiable – will also help to diversify your assets into a larger range of investment alternatives.
5. Always budget
Budgeting will help you to stay goal-focused and ultimately more productive. It will ensure that you can plan better, enabling the business to meet its objectives and allowing you to make confident financial decisions.
6. Get a financial advisor Not only will a financial advisor make sure you do all of the above, but they will also create and monitor your investment portfolio, ensuring that your investments are aligned with your financial goals.
Our advisors here at Advisa Wealth will fully evaluate your attitude to risk and we will use our unique investment proposition to give you a risk-rated portfolio to match your attitude to risk. They will offer you regular reviews as required to ensure you are on track to your respective goals.
Our services also include investment management, pension planning and financial protection.
Incorporating good financial management practices should be one of the first things you establish in your business. It will not only set you up for long-term financial stability, but it will also allow you to make effective use of resources, focus on your stakeholders and provide you with peace of mind.