Small Business Success Tips - Finances
Starting with fifty dollars or starting with five hundred thousand, a small business
owner must, must, must have a handle on his finances if his business is going to survive.
You don't need a degree in accounting to apply common sense or to take good advice. You do
need a little self-discipline, but that comes fairly easily if you understand the reasons
behind keeping track of your finances. After all, you have no problem doing what you
consider the important parts of your business.
Accounting, bookkeeping, financial management, call it what you will, is more than a
necessary but boring task. Money is a resource that you are using to help create your
future -- your many futures: next week, next month, next year, ten years from now. To the
degree that you do not have control over your money, you are not controlling those futures.
Most people would say, "Here is where I want my business to be in a year; how much
money do I need?" That is not controlling your future. The future starts now, today. So
the correct approach is, "Here is how much money I have. How do I use it to get where I
want to be in a year?"
See? Two necessary conditions: knowing how much money you have, and knowing where you
want to get to. These conditions lead to the following necessary, basic rules of business finances.
1. Keep business money separate from personal money. If you put personal money into the
business, it becomes business money.
2. Keep track of every penny every day, both the ones coming into and those going out
of the business. This may seem obsessive, like keeping track of every nail in your tool
bin, but it is not, for several reasons. For one thing, it will save you a lot on taxes to
have accurate records. But even more important, you will be able to accurately evaluate
your progress toward the goals you have set, and adjust your current actions accordingly.
3. You do not necessarily have to have a full accounting program on your computer to
keep track of your income and expenses, but at the very least, you do need a single,
specific place where everything is written down. A notebook will do. Stationery stores
carry well-organized books designed for that very purpose.
4. Set some money aside each week. No matter how tight things are, or how much you owe,
keep a steadily growing fund, and never touch it. Some regular percentage of your income
is ideal, but if all you can set aside is a dollar, do that. This fund is not a reserve,
to be used for emergencies. This fund is never used, except maybe, someday, as a down
payment on a building.
Step Four is where almost all small business owners fall down. They don't have the
complete idea of using the money they have to get where they want to be. So get this
straight, right now. Part of where any small business owner wants to be is solvent, and
you don't become solvent by spending everything you make. Always set some aside.
5. Spend only what is absolutely needed, even if you have more cash than usual. It is
very easy to splurge on new equipment or extra advertising or whatever, when the money is
there. Don't do it. Spend what you need to, and set the rest aside. This fund is a
reserve, a temporary surplus, completely separate from your other don't-touch fund.