When it comes to financial advice for entrepreneurs, there’s a lot of discussion about maintaining good cash flow and making sure that you properly manage expenses. But there’s much less discussion about how exactly entrepreneurs should go about managing their own personal stash of cash. After all, a lot of the money that their businesses make goes straight into their bank account.
In the future, entrepreneurship is going to become more and more important as new market opportunities emerge. In fact, we’re living through something of a startup boom, making it more important than ever that children – the future workforce – know how to manage their money as business leaders.
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Here we’re going to look at what some of the world’s top entrepreneurs said about managing their personal finances in a bid to find out how to do it right and what information we should pass on to our kids. Let’s take a look at what they said.
Keep Business And Personal Accounts Separate
Rachel Rodgers, the boss at a local legal firm, says that young entrepreneurs should keep their business and personal finances separate. It is not a good idea to get them mixed up, mostly because it then becomes tough for accountants to disentangle business expenses from personal expenses. Rodgers advises that entrepreneurs use tools, like Mint, to pay themselves a regular, predictable salary as early as they possibly can. This, she says, will help to keep track of personal funds, while making sure that the business account does not become contaminated by personal expenditure.
Take Payments Wherever
Most modern entrepreneurs don’t do transactions face to face. Instead, they do business with people all over the country, and sometimes the world. The fact that in most of these situations, the payment card isn’t actually present means that entrepreneurs often need their own high risk merchant accounts.
These accounts make it easier to accept payments, even when transaction risk is high. Many banks won’t accept certain types of international payment, or won’t accept some companies soliciting those types of payment, so it’s important to find partners that will. Having a system like this in place helps to avoid cash flow issues, says David Ehrenberg, boss at a financial services company, and makes it easier to avoid big business losses.
Track Personal Expenses
Keeping track of expenses is part and parcel of being an entrepreneur. But Aaron Schwartz, boss at a watchmaking company, took this to the next level. He knew that he wasn’t going to make a lot of money during the first year of his business. As a result, he kept track of all of his expenses, including spending 75 cents on an apple, just to keep track of the rate at which he was burning through cash. Once he knew what this was, he stuck to his expenses schedule religiously, only buying the stuff he needed and recording it all on a Google Docs spreadsheet.
Use Accounting Software
Zach Cutler of the Cutler group recommends that all new businesses start off by using accounting software. This, he says, helps separate business from personal finances.
