Once you are ready to get your business operational you need to make sure to separate your personal and business bank accounts as you are now responsible for the finances of two people – your own finances and those of the juristic person or business you have created.
Nevertheless, effectively managing your personal and business finances goes deeper than simply building up financial buffers and different bank accounts. Your habits around the handling of money also goes a long way.
You need to intentionally work on becoming better at financial management by:
Making an effort to keep expenses below your income in both your personal and business finances. Expenses rise to meet income, so ensure to always give yourself a safety net by living and operating the business below your means;
Automating your bill payments to avoid missed payments and collection agencies. Automating your bill payments allows you to set up specific rules for each bill and alerts for expectations allowing you to put your bills on auto pilot and focus on your business;
Planning for rainy days or even months which you will inevitably face. Expect to deal with irregular income and plan for leaner times. Ensuring that your personal and business finances are in order will also make it easier for you to access credit should you need it in the future;
Negotiating everything by constantly engaging with your stakeholders to renegotiate better terms for your business; you can make the renegotiation a once-per-annum affair;
Taking your business out on a money date once a quarter to assess whether you are still within your financial goals and budget. It’s also the perfect opportunity to reflect on your accomplishments, where your business is now and where it’s headed;
Planning for your financial future by insuring your business’ biggest asset – you. Your ability to generate an income is your security so ensure you have risk cover like life insurance and still put aside for your retirement even on a fluctuating income; and
Diversifying your finances and investments in case your business venture does not succeed. Diversifying gives you breathing room should things not go the way you anticipated.
Olwagen says what is important to remember is that you need to spend as little as possible in your personal capacity for at least the first two to four years of business. Although we’d like to think being an entrepreneur will make you rich quickly, the reality is that it takes years to turn a business into a self-sufficient money spinner .