Advice for entrepreneurs
BE RESPONSIBLE: STAY ON TOP OF BOTH INCOME STREAMS AS YOUR BUSINESS TAKES OFF
Don’t let personal finances crumble while making business finances sound.
One of the trickiest parts of owning a start-up is learning to manage finances. You have to control cash flow as you (hopefully) edge towards making a profit, stick to a budget, and build an emergency fund for lean times. But it’s also important to ensure your personal finances don’t crumble while you’re making sure your business finances are sound.
Here are tips to help you stay on top of your personal finances while your start-up takes off.
The most important tip is this: be very strict about keeping your personal finances separate from your business finances. It’s important to treat yourself as an employee who earns a set monthly salary, and not to use the business finances for your personal expenses. If you allow your business and personal finance boundaries to blur, and your business goes bust, you could be held personally liable for debts.
You should forecast your finances, document your expenses, have a budget, know what you’re spending on. Look at how you are bringing in money and how you can make the most of that money.
Find ways to pay off your debts.
Make sure you have a solid credit history and don’t get into any personal financial trouble. You might need a business loan to expand your business in the future. Start by tackling those credit accounts with the highest interest rates. If you have multiple, smaller loans, look into debt consolidation (but make sure you understand all the risks and red tape).
This fund should have three to six times the amount you live off each month. This is useful for living and for your business, should you have months that don’t go according to plan. It will also ensure salaries are paid and outstanding payments are met. When looking at savings account, look for those that offer higher interest rates.
It’s important to diversify your portfolio. With every new venture comes the risk of failure so it’s important to spread your wealth over many different investment options.
Shirley Smith is chief operating officer at Old Mutual Finance