⏱ 4 min reading
Staying on top of your money is basically one of the most important things as a business owner. But no matter how hard you try, there will always be things that slip your attention or which go by slightly unnoticed. These little nuisances can turn into big things and therefore it’s important to try and prevent this as best as possible. One of the best things to do this is by planning ahead so you can make sure to stay on top of your money management for the business.
Once you’ve set financial goals, it doesn’t end there. You can easily write down some goals and think that’s that but it’s important to actually take action on achieving those goals. Whether or not you’re on track for those goals, it’s important to reflect on how things are going. So before we’re starting to look to the future, also have a little look at the past months and how things have been going. Once you’ve done this, let’s look at a couple of things you can do to start planning ahead with your money.
1. Try to work ahead of yourself
Planning ahead doesn’t necessarily have to mean actually getting ahead of yourself, but when it comes to managing your money, this can relieve you of future worries. Especially if you have a rather inconsistent income, or if you tend to have many clients that pay late or pay you at different times throughout the month. When this is the case, it can be difficult to pay yourself at the end of the month (actually paying yourself a monthly salary also includes staying on top of your money, but we’ll get into that in a bit). When you find yourself in this scenario, try to work ahead of yourself to see if you can get one month ahead. This means that when it’s the end of August, you will already have enough to cover all your outgoing money for the month of September. In order to do this, you have to look at your expenses and save up one month’s worth of expenses to start. Make sure to make a separate fund for this and any extra money that you might get, you can store in this fund.
2. Treat yourself like an employee
By treating yourself like an employee in terms of money, we mean that you need to pay yourself a monthly salary. Having two separate accounts is a good way to start because then you’ll be able to better distinguish between your personal and business’ income and expenses. If you’ve actually gotten ahead of yourself one month, this one is quite doable because you’ll know you have enough to cover the next month. By having separate accounts, it’s easier to know all about your finances. Make sure that you set an automated monthly transaction from your business account to your personal account.
3. Set up an emergency fund
You know, just like how you set up a personal emergency fund. Just in case your dishwasher decides to stop working or your car breaks down. Why should you only do this personally, when you can also benefit from this on a business level when things are not going how you’d like them to go. Particularly when you have a seasonal business, it can be difficult to make sure you keep the same income each month. With an emergency fund, you will have a little backup when things seem to get really tight. Depending on your type of business and past performance, you should be able to determine the amount of money that should roughly be available in your emergency fund.
4. Get a separate tax account
We know we’re talking a lot about separate accounts here. But honestly, it’ll free up a lot of mind space if you already have those set accounts and know how much is in them versus having literally everything in the same account with no overview whatsoever. Setting up a separate fund for your taxes is another one that means you will better be aware of your money. When you have this together with your normal account, it may be difficult once the moment comes to pay your taxes. What’s different from an emergency fund is that with a tax fund, you essentially need to draw a certain percentage of your monthly income each month into this account. It’s very much the same as when you work for somebody else, only then they do it for you. You should look into how much you should deduct from your monthly salary each month, and keep in mind that when your income goes up, so does the amount that you need to pay your government for taxes.
All in all, the best advice we can give: create separate and designated funds so you know where your money is and where it’s going. The first step of doing this is by creating a separate business and a separate personal bank account and from there on, you will be able to make different funds for different needs. We’ll guarantee you that once you have this overview, it’ll be way easier to stay on top of your money.