Money Habits To Choose While You Start Your Business

There is no doubt that starting a business is exciting. You can expect a variety of challenges and opportunities to learn, but the most important one you will confront is building good money habits. It's crucial to choose and follow the right money habits, especially because you can expect that money is going to be tight when you start a business; it can take a year or more to earn profits. Efficiently managing your business finances will prove useful not just in the early stages, but also in the long run. Here are some simple money habits that can help keep your business healthy.

1. Save wherever and whenever you can

'Never spend your money before you have earned it.' This is a popular quote, and for good reason: it's something every startup should remember and cultivate. Here are some ways you may be able to save money for your business.

• Save on office rent

Most businesses today are remote businesses. Carefully think about whether you really need that big office in the central business district. If you decide to invest instead in setting up robust remote-work systems, you can save a lot each month.

• If you can automate it, do

Automation can save a lot of time - and time saved is money saved, as every business owner knows. Some functions commonly automated by businesses include Human Resources and payroll management, responding to new leads or inquiries, parts of the recruiting and interviewing processes, etc.

• Get smart about hiring

Hiring is one of the most key parts of a business - and getting strategic about hiring can be one of the best ways of saving money. Remember, it's the quality of employees that matters, not the quantity. Make sure you hire the right people with skillsets and mindsets that align with your business needs.

• Try hiring part-time employees and integrating outsourcing

Avoid hiring too many full-time employees if the same work can be done by contract or part-time employees. If correctly done, outsourcing - that is, using an external supplier or provider to get a product or service that you need - can help you get high-quality work at lower prices.

• Avoid unnecessary business travel

If you can finish a piece of work with your mobile phone or online, avoid wasting time and money on business travel.

• Say no to lavish celebrations

Celebrating successes can be fun, and provide much-needed morale boosts. But for the first few years of your business, it may be wiser to opt for smaller, low-key celebrations.

2. Follow a strict schedule for accounting and reviewing finances

• Bookkeeping should be done weekly. It will take less than an hour if you make it a habit to do your bookkeeping every week. This will make your work easier and you will be able to detect errors easily.
• Review your expenses and income monthly. You have to analyse if you have spent more or less than you planned for, and compared to the previous month. It will also help to understand which categories you are spending the maximum amount on. Doing the same exercise for your income will help you reduce unnecessary expenditure and increase your revenue.

3. Choose the right accounting software

The array of accounting software choices available can make it difficult to choose one. Make sure the software you choose has time-tracking and cost-tracking features. Find out what software programs people with similar businesses are using. Getting the right program will save you from future regret.  

4. Make use of tax benefits and deductions

There is a common misconception that enjoying tax benefits or seeking methods of tax relief is illegal. This is not the case: all businesses and individuals can legally adopt methods of tax relief. If you don't know where to start with tax-saving investments, seek the services of a tax consultant who can guide you. He/she can give you advice on tax-saving investments.

5. Save for your taxes

This is one habit everyone should build, not just business owners. When you set aside a small part of your profits every month, the need for drawing large sums of money to pay taxes will not arise - as you can imagine, this will be a great relief. Open a tax savings account and deposit a small percentage of your profits in this account every month.

6. Formulate a budget - and stick to it

When you start a business, budgets are very important as they are estimates of your business results. Make a budget on the first day of every month and make an estimate on your income and expenses for that month. Budgets help to cut costs, identify problems, increase revenue and make the right decisions. Compare the actual costs and revenues with the budget and take corrective actions.

7. Manage your business cash flows skillfully

If your business cash flow isn't managed properly, you could be looking at a shortage of funds, which is one of the main reasons new businesses close. Here are some methods  to improve your cash flow management.

• Optimism is always handy, but it helps to have a healthy dose of pessimism when it comes to your business finances. You must ensure that your business is ready to meet unexpected situations. An unplanned expense or project cancellation could be disastrous for your cash flows. Conduct a risk analysis and anticipate where your business might meet these situations, and be prepared to meet them.
• Manage your outflows efficiently. Cutting expenses and putting off money spending are two important aspects of managing your outflow. Capital expenditure plays an important role in outflows. You should delay them until they are absolutely essential and unavoidable.
• Address the problem of long delays to your inflows. Find ways to make your customers make early payments. One method could be discount offers or other incentives for clients who make prompt payments.
• Make monthly cash flow budgets and review to have a clear understanding of the financial status of your business.
• Set aside a salary for yourself. It should be an affordable amount that will not affect the running of your business.

8. Set aside an emergency fund

It's not just individuals who need emergency funds. Your business needs an emergency fund - probably more than you do. A new business may take off at high speed but it may meet with a bump on the way. To save your business from the unexpected bumps you should build an emergency fund. Make sure whatever you save for emergencies is in readily accessible cash, not locked in investments. You should have instant access to the emergency fund. The purpose is not served otherwise.  

9. Never mix business and personal expenses

New or first-time business owners, especially sole proprietors, make the mistake of mixing personal and business expenses. Avoid making this blunder - keeping business and personal expenses separate is a habit that will serve you well. If not, there can be a lot of problems with taxes and accounting. Here are some pointers for common areas where this comes up:

• Don't use your personal credit card for your business expenses.
• Keep personal vacations distinct from business travel in every way - financially and otherwise.
• Don't write off personal expenses as business expenses.
• Don’t withdraw money from your business account to pay for personal expenses.
• Likewise, don’t withdraw money from your personal account to pay for business expenses.

10. Set your own short-term financial goals

Long-term goals alone are not enough. Short-term loans like monthly, weekly and maybe even daily goals will help make sure you attain your long-term financial goals. Take care to ensure that your goals are realistic - unrealistic goals are often unattainable goals, which will leave you discouraged and depressed. On the other hand, attaining your goals will boost confidence and help your new business grow.

Healthy money habits such as the ones described above can greatly help your new business reach new heights. When in doubt, seek the advice of a qualified professional such as a bookkeeper, chartered accountant, or tax expert. A little bit of short-term focus can pay off in the long run for a new business.

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3) How to start a Branded Clothing Store Business in India? Your A-to-Z Guide
4) Top 10 Things Every Business Owner Should Know & Do.