5 Tips for Financial Empowerment Month
April is Financial Empowerment Month, a time dedicated to highlighting the importance of financial education to promote smart money habits and build long-term financial security. This is especially important for small business owners. While entrepreneurs are often driven by their passion to create, be their own boss, and build the business of their dreams, they also face the challenge of managing their finances. But you don’t have to take that task on your own!
Here at Prestamos CDFI, our team of Business Advisors and Lending Experts is here to help you understand your finances, access capital, and make informed decisions to help invest in and grow your business.
In celebration of Financial Empowerment Month, we asked our team for their top five financial tips for small business owners to help get you on the right path towards financial literacy, independence, and security.
1. Separate Business and Personal Accounts:
One of the most common mistakes early-stage entrepreneurs make is keeping all their expenses – business and personal – in one account. While it may seem convenient at first, this strategy can really hurt you in the long run.
Set your business up for success from the start by separating your accounts and opening a dedicated business account. This will help you stay organized and make tax time much easier!
2. Pay Yourself First
You started a business to make money, so make sure you pay yourself first! Paying yourself first includes ensuring you are compensating yourself accurately for your time and effort, as well as putting money aside in a savings account for future investments.
When you are building out your monthly budget, make sure you are the first expense you account for. From there, you can establish what you have to spend onother business expenses and costs.
3. Know Your Cash Flow
Cash flow is one of the most important figures you need to know for your business. It is defined as the amount of money coming in and out of your business over a certain period of time. Generally, this figure is used to determine the financial health of your business. A simple way to think of your cash flow is:
Cash Inflows (Revenue) – Cash Outflows (Costs) = Cash Flow
In simple terms, cash flow helps to determine whether your business is profitable, or if you’re operating in the negative and at risk of possible bankruptcy. Knowing your cash flow is especially important if you’re looking to get access to loans or other types of financial infusions.
4. Stay Organized
We know you have a million things to track as a small business owner, but prioritizing your finances is key to ensuring the long-term success of your business. Be sure that you are tracking your expenses, sales/earned income, tax liabilities and other key financial figures on a regular basis – monthly is recommended.
Also be sure to have a designated place and system for any important documents, such as licenses, tax forms, and receipts. This will not only help you during tax season, it will also help immensely if you are ever applying for a loan or working with investors.
5. Check Your Credit Often
Credit is one of the most powerful tools you have at your disposal. While you may not have the funds to invest in your business yourself, a strong credit score helps potential lenders determine their risk level when working with you. A strong credit score can lead to better terms, stronger relationships, and can protect your personal credit.
You can check your credit score easily by using free online resources and then use that to make informed decisions on how to improve or maintain your credit.
If you’re ready to take your financial literacy and business acumen a step further, but aren’t sure where to start, now’s the perfect time to schedule a call with our team of experts. Our Prestamos Business Advisors are here to help you understand your business, your financials, and the steps you can take to grow.
Click here to tell us about your needs and get started today!
