What is the greatest thing since sliced bread? Financial literacy.
It is not a savvy answer. It might confuse most. Not that before sliced bread, which was invented in 1928, people were financially inept. Since then, tools and the manner in which we manipulate our finances have changed and evolved. Finances, to some, seem like a dirty word, another dreaded f-word, one that makes you shudder. It is simply a chore, something no one enjoys doing, even though it is incredibly important.
We live in a start-up age. This era has seen a boom in new businesses and we will continue to see this spirit of entrepreneurship in the future. More and more individuals are starting businesses as either their full-time job or as a part-time project. This wave of entrepreneurial innovation would mean that more people need to be smart about how they invest their money and handle their expenses. Financial illiteracy is one of the main reasons businesses fail.
Resource management is more than just financial literacy, but it all leads back to money. If your skilled labor is focused on tasks that do not contribute directly to your fledgeling company’s growth, then you are wasting human resources and the money that funds that.
If you are spending time trying to develop ‘contact equity’ (developing connections for your business) at the risk of squandering resources to do so, then you need to re-evaluate your priorities. The same could be said when developing products and services. This is not about cutting corners to create a shoddy product or a lackluster service, this is about cutting out the non-essentials and extravagancies.
Marketing and promotion is another area where monies are spent unwisely. You find that either there is too little or too much put into active promotion. Many start-ups rely on social media, mainly paid and sponsored posts. While there is nothing wrong with that, marketing does not need to be expensive to be effective. This will not automatically generate leads. Instead of shelling out money frantically, sit down to generate a comprehensive plan. Long term strategies will provide longevity for your company.
Just like so many do in their personal lives, business owners spend money on things that other people spend money on. The same way you feel compelled to follow the crowd when buying the newest mobile phone, you might feel compelled to invest in a physical location when you do not need it. An extensive set-up with all the bells and whistles aren’t necessary for each type of business. Perhaps the most crucial tool is awareness.
Be aware and honest about what you really need to succeed.
Separating your personal accounts from your business accounts can seem daunting and unnecessary at first, but it is better to get this over with in the inception. It might be tempting to splurge with your business account, but be wary and exercise discipline. This is not a frivolous account. This is one step to managing expenses. Educate yourself about the local tax laws and see what can be listed as deductible as business expenses.
Tracking the monetary ins-and-outs of your business is easier now with the many apps and software available. Of course, there is no one-size-fits-all, so you must do your own research. Determining the best fit will depend on your needs. Some factors to keep in mind are security, privacy, ease-of-use and price.
Not only should you track expenses, but also investments in your company. It is not feasible to keep pumping personal reserves into your business with no record. You should also keep track of your financial goals. Projections and predictions for the future help you to prepare for obstacles. This will help you manage any overspending and analyze periods when you see favorable results.