According to Alan Safahi, a professional, skilled, and experienced entrepreneur and founder of a successful startup company in San Francisco, entrepreneurship allows people to say goodbye to the traditional 9-5 job, create their own businesses, polish their skills, and achieve their goals.
An entrepreneur makes a living doing what they love, focuses on constant development/growth, and creates a positive impact on society. However, 80% of small businesses quit in their first five years due to a lack of financial knowledge and literacy. Today’s article will give you seven financial tips to streamline your operations. Read on!
1. Establish Financial Goals
Having a financial goal will give you an outlook on how you see your money and make informed decisions to achieve a better and stable financial health. Entrepreneurs' financial goals involve achieving a reliable profit margin and reaching their tangible objectives, including saving money, purchasing equipment, and generating higher returns on investments (ROIs).
Alan Safahi Orinda says it is crucial to allot regular time to set your goals, consult your numbers, compare your finances with your competitors, create solid action plans, document the overall progress, and track the records.
2. Create A Budget
Most entrepreneurs fail to create a budget for their business, leading to financial issues in the long run. A detailed budget based on real-time data is an essential tool that guides you to make informed decisions and optimize your business processes.
Creating a budget provides you with essential information for operating your business within your means. At the same time, you can manage unexpected situations, counter challenges, and generate higher ROIs based on your business needs or goals.
A comprehensive budget lets you identify your capital, estimate your expenses, and anticipate revenues. Safahi, a professional entrepreneur, recommends examining your revenues, subtracting fixed costs, identifying variable expenditures, setting aside an emergency fund, and creating your profit and loss statement when creating a budget.
3. Track Your Spending
Track your business's finances can help you avoid legal penalties and grow your business. If you want to prevent lawsuits, expand your business, and implement reliable strategies without losing money, focus on tracking your spending.
Safahi recommends using advanced, cutting-edge financial tools and software applications to digitize your receipts, categorize and keep your expenses in a centralized location, and create a dedicated business bank account.
4. Keep an Eye on Your Credit Score
Managing your credit score is an essential factor when getting loans for your business. You can keep your finance in order and ensure better organization when you have an optimal credit history.
According to Safahi, an entrepreneur must build a credit history, make payments on time, keep their credit utilization low, and find ways to boost their credit score. Don’t forget to check for errors in your credit report. If you find any errors, make sure you fix them immediately. Monitor your credit file for unauthorized and fraudulent activity.
5. Separate Your Business and Personal Finances
When you mix your personal and business finances, you become prone to financial mismanagement. Keeping your personal finances separate from your business asset can protect your business from experiencing legal penalties.
Therefore, Safahi suggests that entrepreneurs open a business bank account, apply for a credit card, use it wisely, and pay themselves a salary to manage their personal finances. In addition, separate your business receipts and educate your business employees on using business finances wisely.
6. Set Up An Emergency Fund
No business can survive without an emergency fund. For instance, many entrepreneurs have closed their business doors due to a lack of emergency funds to tackle the harsh consequences of the Covid-19 pandemic.
So, every entrepreneur must set an emergency or contingency fund to bridge the gap between temporarily ceasing business operations and going out of business. The fund will help you pay your bills on time and reduce the number of liabilities. At the same time, you can continue running your business.
7. Seek Help from Professionals
Although it is wise to learn essential concepts of business finance, Alan Safahi recommends hiring a financial advisor to avoid complications. A financial professional has years of experience and skills to make the most out of your capital investment and optimize your business.
Originally Posted: https://vocal.media/journal/7-financial-tips-for-entrepreneurs
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