Business Tips - 1

Over the years we have observed that entrepreneurs operating small businesses tend to face  similar challenges. One of the many challenges facing emerging entrepreneurs include entrepreneurs having to deal with separating their personal finances from that of their business.

Some useful tips on how an entrepreneur can separate their personal finances and lives from the running and finances of their business include:

Opening a separate bank account:- Many entrepreneurs starting their business find it simpler to use their personal current account to do business transactions. The problem is that with personal debit orders going out and ad hoc withdrawals, an entrepreneur may be unable to gauge how their business is doing. Also there is the risk of spending more than the business is generating which means that an entrepreneur will not have any reserves to plough back into their business, ultimately limiting the growth and success of the business.

Paying yourself a salary:- In order to successfully separate their personal finances from the finances of their business, entrepreneurs need to view themselves as an employee of their business and pay themselves a salary. If an entrepreneur has a monthly income from their business, then the temptation to dip into the business funds to cover personal expenses will be reduced.

Draw up a budget and stick to it:- Starting a business can often mean a difficult financial adjustment until the business is up and running. Entrepreneurs need to be realistic about how much income they are going to generate and whether they can support themselves and their lifestyle. A business may have a high turnover, but that does not necessarily equate to high profits. Entrepreneurs need to draw up a budget and stick to it.

Keep detailed records of all income and expenditure:- Keeping receipts, and recording amounts spent and amounts brought in, will give an entrepreneur a true reflection of how their business is progressing. Without all the information, it is harder for an entrepreneur to exercise discipline and change their spending habits.

Be accountable:- Ultimately the success or failure of a business depends on the entrepreneur. On the BEI Programme, we have observed the difference it makes to have a mentor to hold an entrepreneur accountable for making sure things are done the right way in their business. Entrepreneurs starting out would do well to find a mentor, who amongst other things could hold them accountable for managing their expenditure.