When you’re new to running your own business, there are so many things to juggle. One thing that often gets pushed to the side is setting up your finances. But ignoring cash flow can kill your business. So the earlier that you get on top of your money situation, the better it is for your long-term success.
What sort of habits are you setting up?
I know many business owners who say that they will pay themselves once the business is making a certain income. Or they’ll put money aside once they make enough to start paying taxes.
But here’s the thing. By not establishing good financial habits early on, you set yourself up for difficulties down the track. You slip into a routine of spending everything that you earn. So by the time you hit that ‘magic number’, you still can’t pay yourself. Hint: I don’t think there is a magic number.
Parkinson’s law states that work expands to fill the time available for its completion. My husband the scientist says the same thing about gases: gas expands to fit the volume allotted. And I know it’s true with money – expenses expand to equal income. Sometimes expenses even expand to exceed income. ☹
Unless you choose to do it differently.
Set up good habits from day 1
If you set up good money habits from the beginning, you’ll support your business and yourself from day 1. Even if you can put aside only a few dollars each week to pay yourself a tiny salary and contribute to your retirement fund, it’s a start. As your business grows, your salary and contributions will grow with it.
The two hats of a business owner
I always say that as a business owner, you have two hats. You are both the CEO and the star employee of the business!
Now, if you were a star employee at any other business, you’d be taken care of. Your boss would pay you well. They would reward you for a job well done with a bonus or maybe an extra day off. And they would contribute to your retirement fund.
But when you’re self-employed, it’s easy to forget this. We’ll happily pay someone to help with our marketing, our content, our website or our graphic design needs. But we put paying ourselves last. Many business owners don’t even contribute to their own retirement fund, which can lead to serious money concerns down the track.
Be the CEO you want to work for. Take care of your personal financial needs first.
Related article: How to bring more money into your business
Not knowing is scarier than knowing
I know. Accounting and bookkeeping and all of those things can seem intimidating. But here’s a little-known secret – not knowing your financial situation is actually worse than knowing every detail. If you don’t know, you can’t do anything about it. But when you take time to crunch the numbers, you can take action to keep yourself headed in the right direction.
At some point, we have to put on our big girl panties and take charge. When you stop running from finances, you learn where the money is coming from, and where it’s going. You know when bills will come in, and when you need to pay them.
Knowing the details allows you to do more of the things that bring money in, and spend less time on things that don’t. It’s a more empowering way to handle your finances and your business.
There’s always something else to spend money on
There is always a next level of whatever you are spending money on from day 1. There’s the next level business coach, a smarter website, or investing more money into Facebook ads. You can upgrade your booking system or get another photoshoot.
But at the end of the day, those things are not what makes your business a success. You are what makes it a success!
So if you’re procrastinating on setting up your finances, now is the time to act. Ignoring cash flow can kill your business. But when you take yourself seriously as a business owner, others will follow.
If you’d like to know how you can finally stop ignoring your cash flow and set your business up for success, let’s talk! I’d love to see you I can best support you. Click here to schedule a free 30-minute Get Acquainted Call.