A top reason that new businesses run into problems is due to cash flow or finance issues. Taking care of all aspects of the business can be a lot for one person and it is easy to let managing the finances slip somewhat. But this can lead to serious problems and even the end of your business and a load of personal debt. The key to success in business is creating the right personal finance foundation for your business and here are some tips to help you do this.
Tackle debt reduction
There are a lot of solid reasons to tackle debt reduction. But from the view of starting your own business, if you are carrying a lot of debts as you go into and you run into trouble, it could much more difficult to get help.
Look at the debt with the highest interest rate first which is often credit cards. Student loans may be worth focusing on. You might even want to consider looking at your borrowing to see if you can consolidate it into one place. You might want to call the Experian to check your current credit status and see if there are any recommendations to improve it and get better interest rates on any borrowing. See here https://www.phonethem.co.uk/experian-contact-number.
Look at your spending
When you have a set income every month, it is often easy to fall into bad spending habits or at least not taking as much notice of where your money goes. But when planning to launch your own business, it is important to get a handle on spending and a better idea of what you need to live on.
Poor spending habits can highlight other problems with yourself or in your family that you might want to tackle. Impulse shopping is one example – not only does it add to debt, but it isn’t ideal if you are in your own business. You need to make decisions from a planned, considered viewpoint.
Build an emergency fund
Many of us don’t have savings of any note or some kind of emergency fund. We know we will get another pay packet at the end of the month. But if you don’t have this security, you don’t have anything to fall back on if there are lean times. Ideally, you might want a fund that could cover 3-6 months’ worth of personal living expenses, although this might be difficult to get all at once.
Look for a savings account that gets you some interest on your money. You may even want to see about a pension scheme for some of the money as well as once you are self-employed, there is no-one to pay into this fund.
Get the right insurance
Everyone hates insurance – right until you need to use it. Then it is a life saver. As an entrepreneur, you should look into what kinds of insurance you might need or might want and what costs are involved. You don’t want to go crazy with insurance and end up paying out a fortune but you do want to protect yourself and your business.
There may also be types of insurance that are required, depending on your business. Public liability is one example while insurance for any business premises, equipment or vehicles will also be needed. You may also want to look at the specialist cover for your occupation.
Have good accounting practices
While you are putting together an audit of your personal finances ready to start your business, you can also start to create good accounting practices to help you when you do begin your life as an entrepreneur. There is bookkeeping software that operates over the cloud that allows you to track all income and expenses and even see when you need to start putting money away for income tax and national insurance. Also, consider chatting with an accountant – they can help you with personal finance organisation and put practices in place for your business when the time comes.
There are no hard and fast rules to adhere to when organizing your personal finances in preparation for having your own business. But it is good practice to take some or all these steps to help protect you as you start a new path.