5 Most Important Finance Lessons For Entrepreneurs
Being a financial consultant, we had a lot of advice to offer when it comes to money and personal finances. As you/we are 20's to 30's, young and energetic, you/we used to turn the deaf ears whenever the conversation steers towards finance.
But that was just until we became Adults and realized how useful those little pieces of bits of advice were.
Now that we’ve accepted it, without further ado let's dive on with pondering over 5 universal money lessons which could come in handy for any aspiring entrepreneur
Keep track of your cash flow
You always emphasized quite a bit about the importance of maintaining a stable budget and sticking to it. Have you ever sit down every month with your monthly bundle of bills, trying calculating the expenses, and tally everything?.
We are advised to make it a habit of checking all the statements and expenses carefully offer a complete control over our spending pattern.
You may claim that “I never had a budget for personal funds, but I survived.” Just because you glazed through it doesn’t mean your business would sustain it. It is vital to keep track of the cash flow, what generates revenue for your firm and how it is spent.
If you don’t maintain a record of it, how would you deduce the financial condition of your business? using financial solution and starting track the cash flow would give you an insight into when to rein in and rethink your strategies if required.
Don’t cross the line of budget
Try your best effort to live within the budget means. There were no rules on how you should spend your money(income), except the fact that if you end up spending it all in one go, you’ll have to wait until the end of the month to replenish your stash.
That’s a cute memo, but how is it relevant to entrepreneurs? An entrepreneur’s vision is superior. However, their vision could sometimes make them over ambitious. The field of entrepreneurship is quite unpredictable so overspending your capital or making financial decisions based on your future incomes.
The strategy of “Go big or Go home” may seem appealing and even work for a while, when you have a large stash of capital. But, contrary to your belief, your pocket isn’t Tartarus, the bottomless pit. So stretching your working capital to a thin line by spending an extravagant amount of money may shake the foundations of your fledgeling business.
Don’t fall into the debt trap
While the option of paying installments may seem like a relief to use, many believe it could cause us to splurge a lot more than we initially intended to.
Be a firm believer of the philosophy, “The less you spend/owe, the more you earn.” The stress of debts would only add to the pre-existing chaos in an entrepreneur’s life. While you are busy building your empire by investing all your resources for its benefit, you might be accumulating a deep pool of debt.
So, before resorting to an old-fashioned loan and subjecting yourself to the collateral headaches, try looking for other options, such as crowdfunding, accelerators or incubators before dipping into the debt pool.
Slapping down your credit card may seem like the natural thing to ease through the tight squeeze, but overindulging in the usage of a credit card might take a toll on your credit score, raise your debt stack, and plague your credit books for years.
Don’t be thrifty, spend wisely
Are you a perfect frugal financier? Hell, No! we often insist that frugality isn’t the right way to achieve financial success and that being frugal doesn’t necessarily mean that you are spending wisely.
So, when you want to invest in something and save money at the same time, give importance to its quality instead of going for the cheapest available option.
When you are working on a tight budget, you may end up cutting down some of your vital expenses, and that is never a good idea. Streamlining your cash flow is necessary. However, there are certain areas where you could not afford to slash like marketing, IT expenditures, and human resources.
While you may be tempted to cut down a part of your marketing expense, it could stunt the growth of your company. If it is a tight squeeze, choose a low-cost option, whenever possible hire an expert to take care of your marketing area.
Though skipping a few IT upgrades and quintessential software may be rather tempting, slashing your IT budget could result in long-term consequences. If you could not invest in an enterprise solution, then go for a SaaS product to get the same result rather than compromising on the quality of your software with a considerably cheap on-premise app.
Paying an accountant to maintain your records may seem like a frivolous option, but skipping it to cut down your expense may be counter intuitive to your ambitions.
So, before you decide on trimming down an expense, tread carefully, analyze the long-term consequences before you make up your mind.
Always save for a rainy day
I’m sure at least some of you remember the tale of “Grasshopper and Ant.” The story where ant saved arduously for a rainy day and reaped the benefits whereas the grasshopper hopped about lazily without much thought about the future and died of hunger?
Believe me, you should be aware of that tale too and make sure you always be prepared for the worst case scenario. This piece of advice may sound rather pessimistic, but when you are ready to face the worst, you could definitely handle anything life throws at you.
It might seem unreal and hard to believe, but being an entrepreneur doesn’t make you invincible. Hearing horror stories about the journey of entrepreneurship and thinking that it would not happen to you might be the optimistic way of approach but knowing that nothing is stable and change is the only constant would help you sail through the irregular income.
Thinking ahead, keeping a backup plan in place to use when things financially fall apart would help you come out of a crisis with flying colors.
That concludes the list of financial lessons we would like to instill in the community as well as to entrepreneurs.
The question will be then how do you do that in a entrepreneur of SME, i.e Small and Medium entrepreneur?
Singo Africa Limited has solution for tracking your business cash flow, budget, creditor and debtors, performing all accounting functionalities and in addition for point of sales for restaurant, shop, hardware, pharmacy and any retail business , for those of Viwanda and Manufacturing are not left behind too… talk to us…