Aren’t my business profits mine?
Why will I have money somewhere and lack what I want?
I should be able to enjoy some real fun out of my profit right?
Moreover, I hustled and brought the cash alive, so why not spend some of it?
These are common assumptions that business persons may have had to make at least once in a lifetime; meanwhile, thoughts like these are behind the downfall of many businesses! Once we make a little money from businesses, we tend to spend on small irrelevant stuffs at intervals and end up squeezing the life out of a growing endeavor.
Therefore in this article, we are going to discuss 3 major tips on how you can manage your business funds.
- Your business is different from you:
There’s a rule of corporate identity in one Salomon’s case; persons with legal background are going to perfectly understand what it means, but for you, let’s break it down. What this means is that you should treat your business as a different person from you. Your online enterprise, your delivery business or your small dealings must be treated as a distinct person. That is, you own the company, but not its assets, you can control and run its affairs, but you do not own the cash that comes in or the money lying in its savings. Realizing this will help you to be more careful about touching your company funds, because it will mean that you must refund every dime you borrow!
- Treat yourself as an employee
Once you steer clear from your business’s cash, it is time to get paid yourself; of course you cannot work for free. You will need to provide some upkeep cash and necessaries for yourself and as such, it is advisable that you pay yourself. Therefore, if you are going to buy an extra dress or a new mobile phone for yourself, you should do it out of your salary and pay. It means that you should live within what you earn and not sap energy and resources out of your business funds for your personal needs.
So, strategically and rationally calculate how much a management team should be entitled to, as remuneration with your current business fund, and then fix that as your pay. If you are going to lend out cash to a family member in need, it should come from your personal pocket/salary; if you are going to hangout with your crush, it should be from there too.
- Do not make exceptions in business
Businesses thrive when friends, family and foes pay. Do not make exceptions in business! Hopefully, someday, your business will grow to that level where you can give out massive discounts to specific persons and not feel it, but right now, you need to hold on a little bit. You are running a profit making venture and not a charity program! Make sure everybody pays for the services or goods they enjoy. If you are going to give out something free, then be ready to augment the cost later, remember, your business is distinct from you!
Once you have set the table right, it is time to reinvest the funds back into your business! For more tips on this, click here (link to article about progressive entrepreneurship).
These tips seem hard right? But the truth is that they hold the key to the preservation and multiplication of your business funds. If your endeavor must grow you have to stop reducing and draining its purse for every need! You must have financial discipline.
Swallow the bitter pill and be pragmatic, you are going far with this business, don’t trade it at this level for carelessness.