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The most important characteristic of success in entrepreneurship is the ability to manage finances. However, it can be difficult to establish and maintain financial discipline when income is irregular and expenses tend to be high. It may seem daunting, but taking control of your finances is possible with a little bit of planning and effort. This guide provides tips on how to manage your finances as an entrepreneur.
1. Optimize the budget
The first step to managing your finances is creating a budget. This will provide a clear overview of your income and expenses and help you to avoid unnecessary spending. To start with, make a list of all fixed and variable expenses. Fixed expenses are those that are paid on a recurring basis, such as rent or loan repayments. Variable expenses are those that are paid occasionally, such as groceries or utility bills. Finally, list your sources of income. Once you have created this expenses and income list, it will be much easier to create a budget. Another important factor to consider is the cost of running your business. There may be costs that are not immediately obvious, such as the shipping and storage of stock, insurance, or equipment maintenance costs. To help account for these costs, you can create a line item budget. This is an estimation of all the costs incurred by your business. It is crucial to keep your budget updated as new expenses or income becomes due.
2. Accurate and updated financial records
Once you have a firm grip on your budget, it is important to maintain accurate, up-to-date financial records. This includes records of all income and expenses. While it is important to keep receipts for expenses, these do not provide an accurate total picture of your financial situation. Instead, it is recommended to use a digital finance tracking system that allows you to record all income and expenses with ease. When choosing a finance tracking system, it is important to ensure it is easy to use and has all the features you need. The Dillali app makes it simple to keep track of your spending and income. This will help to streamline processes in the future and make it easier to record and track expenses.
3. Automate bill payments
What’s worse than forgetting to pay a bill on time? Getting unexpectedly cut off from the service you forgot to pay for and then having to pay late fees. Wherever possible, take the option of automating your bill payments, this will take out the stress of having to remember when each of your bills are due and frees up some bandwidth for you to focus on building!
4. Plan For Rainy Days
You check the weather and see there is a 70% chance of rain. What do you do? You take your umbrella with you on your way out to be sure you’re prepared. We don’t mean to be bearers of bad news but as an entrepreneur, your chances of rain (unexpected expenses) are high and as such, it’s very important that you have funds tucked away safely for when those expenses come. There is no set amount that should be maintained in the cash reserve. However, it is recommended to have an amount that would cover at least three months of expenses. This will help to ensure that the business will keep running smoothly in the event of unexpected costs.
5. Tracking late payments
It is important to track late payments as they occur to help minimize their impact on the business. This can be done with a Late Payment Tracker that lists all clients who have not made payments. This will help to track which clients have not made payments and mark them as late payments, giving you the opportunity to flag it and send a reminder about the payment. . With Dillali’s invoicing function you can send payment reminders frequently until the client receives the invoice reminder and pays up. It is important to remain professional and respectful even in debt collection, try as much as possible not to damage your relationship with your clients or your reputation.
6. Invest in good accounting program
Finally, it is important to invest in a good accounting program to help manage and track finances. This program should be easy to use and provide an overview of business expenses, income, and assets. It is recommended to select a program that is compatible. This will help to streamline processes, such as sales and cash flow, and provide a clear overview of financial standing. You may start organizing your bills, costs, and clients all in one place with the help of Dillali's app. With Dillali’s app you can receive detailed analysis of your business finances, you can keep track of your goods and services and a lot more.