So you’ve finally made the leap and decided to build that startup you’ve been dreaming about—congrats! Now in order to ensure that your company is a roaring success, you’ll need to know a thing or two about proper money management. While things may not be overly complicated yet, it’s important to get into good money management habits sooner rather than later.
1. Don’t Mix Your Personal and Business Expenses
Right off the bat, one of the most important money management tips for startup founders is to never mix your personal and business expenses. Not only can this mess with your accounting records, but it can also cause a major headache when it comes to your taxes.
In order to ensure that you’re not muddying the waters, make sure you never use your business credit card for any personal expenses, keep your business trips and your personal vacations separate, don’t write-off any of your personal expenses as businesses expenses, and never deposit or withdraw checks from your business account to pay for personal expenses (and vice versa).
2. Create a Budget
If you’ve never run a company before, you may have no idea how to estimate what you’ll spend getting it off the ground. But just because the numbers won’t be exact, a budget is still a useful starting point. Indeed, the process of researching a budget alone will make you more thoughtful about how you’re spending your money.
To get started, simply calculate how much you make on a monthly basis and then deduct your monthly fixed costs (ie. rent, salaries, insurance, etc.). You can then fill in variable costs that will change from month-to-month and account for any one-time purchases. Over time, you can compare this budget with your actual costs and adjust accordingly.
3. Organize Your Cashflow
Cashflow management can make or break your business, so you should be keeping track of all income and expenses right from day one. Fortunately, keeping your finances in order is easy when you start using a cloud-based accounting solution like OpenDigits from the beginning. Though some founders may opt to track their income and expenses by hand, this method is not only time-consuming, but it’s also easy to make mistakes that could end up costing a fortune. Conversely, with accounting software, you’ll save time, money, and prevent any stress-inducing calls from the IRS.
4. Build an Emergency Fun
Though you may already have a personal emergency fund, it’s important to have one for your business too. Even if your business takes off like a rocket, you’re bound to hit some bumps along the way. To ensure that you have a cushion to protect against these unexpected expenses, be sure to build up a solid emergency fund. Ideally, you’ll want to have three to six months of expenses saved up, but realistically, hitting this number may take a bit of time. To start building up your emergency fund, spend some time looking at your budget and figure out where you can save or where you can make more. Then keep these savings liquid rather than investing them so that you have easy access if you’re ever in a pinch.
5. Outsource Tasks When Necessary
When you build a startup, you’ll likely find yourself handing everything from marketing and sales, to product design and customer service. However, as your company grows, there won’t be enough hours in the day to step into all the different roles. As a result, it’s important to recognize when it may be worth your time to outsource tasks that are taking up your precious time. For instance, if you’re not a financial expert, it may take you twice as long to complete accounting processes that can be done far quicker by experts. Just remember that as a startup founder, your time is money, which is why outsourcing your bookkeeping might be the best thing for your productivity (and your sanity).