One of the greatest gifts of being an entrepreneur is the opportunity to flex your financial muscles. It’s also one of the greatest challenges for me personally.
In fact, many entrepreneurs make the decision to start their own business because they have a certain skill or talent – or an idea for a product. They don’t know anything about the financial aspects of business – like payroll, budgeting, P&L statements, profitability, cash flow, taxes, etc. So what happens? We learn as we go! We rely on the experts. And we develop those financial muscles.
Many of the moms I work with are creative types – writers, photographers, caterers, artists, graphic designers, fitness trainers, dieticians, chiropractors, counselors … and the financial aspects of business don’t come naturally. Very few of them are “in the business of money.” Yet, all of them are in business for themselves.
And if you’re a mom entrepreneur… if you own a business of any kind … no matter what your company is … no matter what service you provide or product you sell, as a business owner, it’s YOUR JOB to know about the money. And if there’s something you don’t know, your job is to find someone you trust who does know. It’s a challenge for some of us to accept this responsibility, but we can’t have a thriving business unless we do.
Here are five financial fitness tips to help you develop those financial muscles and stay in good financial shape.
1. Open a Separate Checking Account for Your Business
This is the single most important step you can take to turn your hobby into a business. For some reason, this simple task is a huge ordeal for many moms when they are just getting started in business. They put it off until they are making money. Or they convince themselves that it’s going to take a long time and require a ton of paperwork, so it’s not worth the effort.
The truth is it takes about 30 minutes to go to the bank and open a business checking account and in most cases all you need is your tax ID number, some identification and an initial deposit. Having that separate account not only makes things cleaner for you at tax time, but it also helps you to take your business seriously.
2. Pay Yourself a Salary – Even If It’s a Small Amount
Here’s another step that many entrepreneurs tend to skip in start up phase. They pay their vendors, employees and bills and then pray there is enough left over to take a distribution for themselves. I understand that when there is little or no profit and you’re bootstrapping the business you may not feel right about taking a salary.
But, hear me on this – you WILL burn out if you don’t have a reasonable steady salary coming in! And you can choose to invest it all back in the company if you want to – but it should still be coming to you on paper. And I know it’s a stretch to think about this now, but if you ever plan to sell the company – or seek investors – you’re going to need an accurate operating budget, which would include your salary.
3. Hire a Bookkeeper and CPA
For most entrepreneurs, this is one of the first responsibilities we need to outsource. That’s because we are not experts in finances, taxes and bookkeeping. Yet many of us insist on trying to do it ourselves. I did this for several years before I realized that it caused a strain in my marriage.
One day I was working on the books with my husband and we could hear the kids playing in another room with a babysitter we had hired so we could prepare our tax return. We sat in the office for about three hours, getting frustrated and irritated with each other while the kids laughed and played. I decided that we would never again miss out on a day of fun with our children so we could do something we weren’t very good at doing and didn’t enjoy doing at all. I immediately hired a bookkeeper and a CPA and have never regretted it.
Remember, when we let go of something we are not called to do in our business, we have an opportunity to bless another business owner who is called to serve others in that capacity. And – we free up our own time to focus on what we are called to do in business and at home!
4. Watch Your Numbers to Determine ROI and Manage Cash Flow
If you are the type of mompreneur who gets wrapped up in the creative side of business and ignores the finances, this is going to be a challenge. But just like a new exercise routine, you start small and make a commitment to be consistent.
The idea is to schedule a specific time every day, week or month (depending on your business) to review your financial statements. This is easier to do when you have a bookkeeper setting up your books with you.
And it doesn’t have to be a complicated process – you can create a simple spreadsheet or dashboard that allows you to track the numbers you want to monitor, such as sales, expenses, returns, accounts receivable, etc. This dashboard will be different for every business, but keep it simple and focus only on the numbers that will help you make better decisions in your business.
5. Set Boundaries Around Your Time and Money
This is one that’s difficult for women because we’re people pleasers and we don’t like to say no. But if we want to run a profitable business, we have to set boundaries around our time and our money. When you set boundaries around your time and our money, you are able to:
- Charge what you are worth for your services
- Outsource or delegate tasks
- Stop saying yes to volunteer projects that steal your joy and leave you filled with resentment
- Identify the charitable contributions and in-kind donations (pro-bono work) you can commit to for the year and say no to others
- Stop attending networking meetings that aren’t bringing you an ROI
- Collect on unpaid invoices
- Require payment in advance for your services
- Attract clients and customers who value your time and will pay what you are worth
What am I missing? Share your financial fitness tips with us here!