Taking a leap of faith and leaving your main source of income to pursue self-employment is an exciting and big step. You have complete control over your activities as well as your financial future. Starting a business, as exciting as it is, is not without its challenges. A small business owner must be financially prepared to launch and grow the company. Taking the time to plan for your business ensures that your first step is as certain as it is realistic. Once your finances are in order, you must focus on increasing profit margins and overall business success.
Here are a few ways you can prepare financially for the launch of your small business.
Starting A Small Business? Have a plan for saving
If you are an entrepreneur, you should understand the worth of every pound you spend.
We understand that as costs pile up. Saving may become a non-existent concept, but your business requires funds to get up and running. Do not become disheartened though. Instead, make a conscious effort to stick to saving money. Your business will thank you for it in the long run. For example, you could commit to saving a percentage of the salary that you pay yourself. Not a huge portion, but enough to build up your savings pot steadily.
Keep an eye on your cash flow
There are numerous reasons why small businesses fail. The most common is a lack of funds, which is often the result of poor cash flow management. You will be able to keep your business financially healthy if you have a good understanding of your cash flow management. If there is a cash flow problem, the business will most likely suffer and may be forced to close. It is cash that gives your company power to hire people, purchase the tools and equipment and the small consumables, such as copper foil business cards that it needs to grow and flourish.
Keep your business and personal finances separate
As you work to grow your company, you will realise that keeping your personal and business finances separate makes things a lot easier. This is due to the fact that a business should exist as a separate entity. The first advantage of separating funds is taxation. You don’t want your personal funds to be taxed as business income. It also means that if you are audited by HMRC, you can show clear evidence of your income and expenditure.
Starting A Small Business? Improve your credit score
Building business credit is essential for growing a successful company. Even if you are just starting out or have some money to support your business, you will need a positive credit rating at some point. A good business credit score can help you improve your cash flow and credit rating. To keep your credit score looking healthy, make sure that you pay all of your bills in full and on time. It is also important to monitor your credit record – this shows if anything has been overlooked or someone is committing fraud in your business name.