They say love makes the world go round, but that’s wishful thinking. The reality is that money keeps the earth spinning. As an entrepreneur, you must understand and appreciate this.
Techniques for Keeping Spending in Check
Unless you were raised in an environment where you were taught how to manage money from a very early age, disciplined financial behaviors probably don’t come naturally. But with an ounce of purpose and a pinch of patience, you can implement the following tips and give your business the solid financial footing it needs to grow.
1. Stay Organized
You absolutely have to stay organized. If you can’t keep your company’s money matters in order, nothing else will matter. Good recordkeeping and proper filing serve as the bedrock for the company’s financial decision making.
Proper organization isn’t as hard as you might think. It involves a good physical storage system, as well as a strategic digital filing system. The physical system can be something as simple as a filing cabinet with different folders. Your digital filing system should be located on a secure cloud platform. Every account, investment, etc. needs its own folder with clearly labeled files so that you can quickly find what you’re looking for.
Another key to staying organized is to keep a master spreadsheet of all of your online accounts with usernames and passwords. This ensures you never waste time trying to log in to an important account. (Just make sure the spreadsheet is protected by something like two-factor authentication.)
2. Stay Disciplined
Finance isn’t all dollars and cents. Sometimes it’s about psychology. If you want to keep your finances in order and your spending in check, you have to stay disciplined.
Disciplined spending may look like using prepaid debit cards instead of credit cards (as a way of ensuring you don’t spend what you don’t have). It might also look like setting a clear and meticulous budget where every incoming dollar is accounted for and every outgoing dollar is planned. You be the judge. If you think you need more structure, create it. If you feel like you have a lot of natural self-discipline, you might be able to focus some of your energy on another aspect of the business. The point is that you need to stay alert and focused so that nothing slips through the cracks.
3. Keep Finances Separate
When you started your business, you likely went through the process of filing paperwork, paying fees, and opening up something like an LLC, partnership, or corporation. Part of the reason you did this was to establish some legal protection and separation between you (individually) and your business.
“But if your personal and business finances are muddled, those legal protections aren’t in effect (what’s called ‘piercing the corporate veil’) — there literally isn’t a way to delineate between you, the business owner, and you, the private citizen,” entrepreneur Meredith Turits writes. “So, if, for instance, a client brings a lawsuit against your company and a judgment goes against you, you’re now personally exposed for damages.”
All it takes is one personal purchase from a business account to completely pierce the corporate veil. Make sure you’re diligent about keeping these accounts separate so that you never run into this problem.
4. Establish a Cash Cushion
Every business needs a cash cushion of at least three to six months of stand operating expenses in order to withstand major unforeseen expenses. If you don’t already have an emergency fund account, create a line item in your budget to fund this account over the next few months.
Who’s in Charge?
As a business owner, you need to occasionally ask yourself this one simple question: Who’s in charge? It’s either you or your money. In other words, either you’re in charge of your money, or your money is in charge of you.
The sobering truth is that many entrepreneurs and their business idea fail not because of a lack of value or market validation, but because of poor financial management. Make sure you don’t fall victim to this reality. All you need is a plan that’s backed by discipline. With this framework established, everything else will fall into place.