The first step to getting your business finances under control is to make sure you have separated your personal and business finances. Without separating your finances, you have no idea how much money your business has or whether it is making a profit or loss. Once you have made the decision to separate your finances, then you need to know how to do it.
Below we outline 5 steps for you to separate your finances and gain control of your business:
1. Decide how much capital your business needs
First you need to decide how much money your business needs to operate, if you have a very small business this might be $100 or if you have a larger busines it may be $1000. It doesn’t matter if you don’t get it 100% correct the first time, you can always add more.
2. Never pay for personal things with the business and do not pay for business things with your personal money
Now that you have capital in your business, that needs to stay as business money. This means that you cannot pay for personal items with business money. This also means you can’t pay for business items with personal money. Everything needs to stay separate.
3. Pay yourself a wage
Paying yourself a regular wage means that you will no longer need to buy personal things with business money. When you receive a wage, its now your money and is recorded as a business expense. A good wage to aim for is to think about how much you would pay someone else to do your job, sometimes your business cannot afford that wage which is fine. But that should be your aim initially.
4. Record money you put into the business
If you need to put more money into the business, record it! If the business runs out of money then you either need to record it in the business as a loan (if you want to get repaid) or as a capital investment, it doesn’t really matter as long as you record it.
5. Record everything
The last step is to record every transaction that happens, it doesn’t matter how small, every single riel or dollar that enter or leaves your business needs to be recorded. Once you are doing that, you can finally see how much money your business makes and then you can start making better decisions.
The Kotra Riel app designed for female entrepreneurs will be available soon to download for free, this is a great tool to improve your business finances and finally get control of your business.