Good financial habits are an asset in both personal and business life. When you know how to manage your money in the most efficient and productive-oriented way, it becomes easier to find opportunities and avoid traps.
According to the U.S. Bureau of Labor Statistics (BLS), only 25% of new businesses make it to 15 years or more. The reasons are varied, but the most common ones are a lack of planning, flexibility, and funding.
It goes to show that the financial stability of a business is not easily achievable. However, in difficult times you can rely on the habits you’ve built along the way to help you stay afloat. Plus, financial discipline helps build your character as it requires strength, open-mindedness, and flexibility.
Moving forward, we will have a look at the four strongest financial habits that any entrepreneur should master.
#1: Prioritize Saving
Nothing showed us the importance of having some money set aside for dark days as the onset of COVID upon the world. Hundreds of small and medium-sized businesses were forced to shut down because, without customers, they didn’t have enough to keep the lights on.
While you won’t be having the same expenses during a crisis, some savings will help you keep the core personnel and will give you time to look for ideas.
The good news is that saving can become a muscle memory habit, once you manage to practice it consistently. Start by analyzing your business’s current income and run an estimate on how much you could save without endangering operations. It can be anything from.
#2: Accurate Tracking
A good entrepreneur is aware of how the money goes through their organization. This habit is not only useful for your awareness of the business but it will become instrumental in your relationship with the IRS, banks, and even investors.
If you work with an accountant, make sure to meet them regularly in order to analyze your spending records. Plus, it helps to learn a thing or two from their discipline and organization.
If you’re the one keeping the books, learn to look for trends and try to understand why there is a fluctuation in your spending patterns.
It also helps to work with a finance and accounting specialist who has completed all the required CPA training courses. Their view is broader than that of an accountant so they can offer deeper insight into how to funnel more money into your business.
#3 Understand Your Cash Flow Dynamics
Sometimes things may seem like everything is going well – sales are up, new customers are coming, and the business seems like it’s growing. Yet, when you draw the line, you can barely pay the rent and your staff’s salary. So what’s going on?
Just because the sales are up and customers are more than you could ever have hoped, it doesn’t mean your business generates enough return on investment (ROI).
After all, to make money you have to spend money so you have to make sure your income covers the regular expenses and the investments you made to get the business going.
So, even though it may be tempting, try to avoid low prices and focus more on building customer loyalty programs. This practice may not bring customers pouring in (at first), but it is reliable in the long term.
Good financial habits take time to develop, but once you have them, it becomes easier to manage the business. Plus, once the business is solid, it will be easier to splurge on your employees and offices. So take it slow and build your business brick by brick until you reach the top!