Saturday, September 1, 2018

Why your personal finances matter in entrepreneurship by AishaTaylor

Entrepreneurship is a way to increase your income and pursue your dreams. However, many people don’t realize their personal finances can matter in business. Managing a business is more than just selling a product or service.  It requires financial discipline. Successful personal financial management can help you practice and develop the critical skills and habits needed to assess business spending, income, financial position, and the value received from business investments or spending.
This post will share 4 reasons why solid personal financial management can help you better manage your business finances.

Better manage business expenses
When you practice financial discipline by reducing impulse spending, you are training yourself to say “no” to the things that don’t matter and say “yes” to more things that add value.  This will help you to avoid succumbing to the temptation to purchase the fresh new product, coaching program, or hot new thing your competitors are doing. Instead, you will decide to focus more on free tools, follow a business budget, create a strategy for things that you will invest in with a clear return on investment in mind, and ultimately develop more discipline with how to approach business spending.

Know where you stand financially in your business
A critical component of managing a business is financial reporting (especially at tax time) and keeping track of income and expenses to ensure that your business is profitable and is able to fulfill customer orders.  If you get in the habit of finding the time and discipline to review your personal finances monthly, then you will also be developing the discipline to do the same in your business. Not only will this make tax reporting easier, it will also help you avoid running out of money which means you may not have the resources for the things you need to grow, expand, or even fill customer orders.  If you are a full-time entrepreneur, then failed to adequately manage business finances can even lead to business closure and returning back to work.

Obtaining a business loan and credit
If you are a sole proprietor or are just starting your business, then the bank may review your personal credit before extending business credit.  If you sign a personal guarantee when taking out a business loan, the bank may review your personal credit history to determine the likelihood the loan will be repaid. Therefore, when establishing business credit, it is also important to work on your personal credit as well.
Funding your business
There may be times when your business isn’t making the income needed to cover your business expenses.  Additionally, you may even need to allocate a portion of your paycheck to help fund start up or relaunch costs.  If this is the case, then review (and if necessary revise) your personal budget to include the amount you are allocating to your business.

Hopefully, these tips help you to understand why your personal finances matter in business.  Leave a comment to tell me how you will implement the tips.

Learn more about Aisha Taylor at  www.FNPhenomenal.comTwitter: @FNPhenomenal

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