Your new business is your baby, where you will spend most of your time and money.
Every entrepreneur starts out determined to turn their dream into a thriving financial success. Yet a surprising number of them lack sufficient financial planning, neglecting to create an efficient, tax-compliant bookkeeping system, whether on their own or with the help of a financial planner.
While launching a start-up can be stressful and certainly comes with financial risks, it’s imperative to make financial literacy a top priority. Even though you can’t control or anticipate everything that could go wrong — no matter how many experts you hire — you can create a bulletproof plan that gives you the best shot at success.
Here are a few suggestions for smart finances for your start-up:
Keep Your Personal Life Separate
If you’re just getting your company off the ground, then it’s possible you’re trying to do all the bookkeeping yourself to keep costs low.
That’s understandable, but make sure that you do your research, said Canadian financial planner, Nathan Garries.
“This is arguably the most dangerous part of your business, and it shouldn’t be taken lightly,” Garries said.
The most common mistake among business owners is mixing their personal expenses with their professional ones. It’s very easy to confuse credit cards or bank accounts early on. But come tax season, those small transgressions can become a huge deal, leading to an audit or even criminal charges.
Make sure that you have a separate bank account for your business, keep every single receipt, and avoid any purchases unrelated to the business.
Hire A Financial Planner
A start-up will typically cost thousands of dollars to get off the ground, and that is before you deliver your first product. Being in the red is not a good feeling, so you definitely want to bring your business into the black as soon as possible.
If you think this is going to be easy to juggle as you ramp up your business — then think again. It takes years of practice to get correct.
Once you have a few employees and your business is doing fairly well, you should consider hiring an expert who will treat your money well.
Once you find an advisor to work with, he/she will check to see if your goals are S.M.A.R.T. (Specific, Measurable, Achievable, Relevant, and Time-Bound), Nathan Garries added.
“If you understand how money can work for and against you, you can make better decisions. Financial literacy is not about wealth but about understanding money regardless of the amount. It’s about how you treat it and how you maximize opportunities,” said Mellody Hobson, President/ co-CEO of Ariel Investments and Chairperson of the Starbucks Corporation.
Keep A Checklist
It’s important to understand finance. A lack of sufficient knowledge about bookkeeping and taxes is responsible for the failure of many small businesses. You could be the best baker in Toronto, but your business will still fail if you don’t take the correct financial steps.
Here’s a checklist of crucial steps you can take to protect your business:
- Review your SMART Goals
- Create a financial plan that works with your business plan
- Research tax situations that are unique to start-ups and your industry
- Find a financial planner to advise you on insurance matters
With sufficient financial planning, you can feel more confident handling the other challenges of running a business.
“All entrepreneurs need to dream big and think big, but that’s not the whole story,” Garries said. “There’s always someone paying attention to the financial details at successful businesses. If you want your business to survive for the long-term, make financial planning a priority.”