As a first time entrepreneur, you may be wondering how to handle the financial matters of your business. You’re not alone; all entrepreneurs have dealt with issues of funding, debt, savings, spending, and paying yourself.
Starting a business without testing the market for your product or service, is taking financial risk especially if you decide to fund your business with other people’s money. If you lose the business, the debt still has to be re-paid. Instead of investing a large amount of cash why not consider using business credit cards.
Funding and Debt:
The main factor to getting approved for business credit cards is based on your credit history. Once approved, there are several things you should do:
- Establish strong payment histories to build business credit.
- Keep balances as low as possible by not carrying more than 30 percent of credit limits on any of the cards to boost credit scores.
- Pay balances in full and on time every month.
- Make purchases related to the business, and only for what’s needed to keep the business running.
We all have different spending habits, but it’s best to develop a spending plan early on. This plan will keep you abreast of your budget and let you how much is afforded to pay down debts each month.
There are also business savings accounts. Most people think of savings accounts for personal use, but they can be a great addition to your business:
- Business savings accounts help prepare for the unexpected if allocated to handle emergencies.
- Business savings accounts are liquid assets that can be moved into business checking accounts to pay vendors, contractors and anyone else owed without interfering with the daily budget.
- Business owners are responsible for taxes, and with the daily operations this task may be overlooked. However, if ten percent is saved from every business transaction, this money can be used to pay taxes without interfering with the budget.
Finally, there’s the issue of how to pay you. If you are a sole proprietor without employees and not much overhead, you pay yourself what you earn in sales minus your costs, savings and taxes. To pay yourself from an LLC, you can withdraw money from the company accounts or give yourself a salary.
Starting a business may be easy, but the hurdle is knowing when and where to spend money. It’s very important to only spend where necessary. Although it’s been determined to make small purchases starting out, this is not a reason to cut corners with what your company needs. Handling the financial matters of entrepreneurship can be daunting, but if you establish a plan for funding, debt, savings, spending, and paying yourself upfront you’ll be that much closer to reaching money-mastery level.