By Joydeep Bhattacharya
Entrepreneurship comes with several hardships. Management of resources and money is one of the biggest issues many entrepreneurs face. For a budding entrepreneurship to be successful, it is important to keep track of business expenditures, while taking care of personal finances. Doing so will not only lead to a healthy business, but will also improve your credit score. Completely isolating your personal finances from business expenditures, or mixing up both of them is a quick way to lead your enterprise to its doom. Balance between the two is key here. Enough youthful entrepreneurs have proven this possible by using simple methods of financial discipline. Read on to find out five simple hacks to save money, especially relevant for young entrepreneurs.
1. Organize professional and personal repositories
While initial funding is likely to comprise mostly of private funds, it becomes essential to divide and distribute funds. Separate your funds in a tangible way, to avoid complications in IRS audits. It is wise to have all of your receipts and spending records organized to submit them in IRS audits. If your enterprise is a corporation, intermingling of personal and organization funds is illegal. Professional help may be required if you have trouble maintaining separate funds. Most companies these days hire trained bookkeepers to ensure that keep track of funds.
2. Prioritize and create a budget
In their initial stages, most enterprises have sparse resources. Being scrupulous and frugal is imperative to survive in such situations. Most businesses aim to scale up and expand their market right from the beginning. This calls for prioritizing. You need to understand and distinguish your company’s essentials from inessentials. A popular book to help people with this is Rich Dad Poor Dad. Note that even after scaling up, further saving will be required, to expand different areas of business.
3. Learn how to read financial statements
It isn’t a herculean task to learn reading financial statements. If you have a grasp of basic mathematics, you can develop this skill in no time. Financial statements show you the “score” of your business, representing its health. Interpreting and analysing balance sheets and cash flow statements is what prudent financial decisions are based on. Analysing this data is easy if done in context with qualitative information about the company (what the enterprise is about, its products and the like).
Several inexperienced entrepreneurs get confused when the expense profiles of their businesses don’t align with the mainstream or “typical” companies, and thus differ in the way their accounts work. Keep in mind that businesses are diverse and thus the health of financial statements for these businesses varies.
Entrepreneurs adhere to certain conventions when writing financial statements, given by Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS). While both conventions are acceptable, the general industry inclination is towards the use of GAAP.
4. Compare car insurances
One of your main expenses in the beginning of entrepreneurship will be a personal one – car insurance. Your enterprise, very soon, will need consider a fleet of vehicles to drive to various clients, contractors and other employees, manage logistics, offer hospitality to business guests. So insuring your automobiles is crucial, and picking the right insurance may be daunting.
It is prudent to pick a contract with an insurance company after comparing the prices of numerous car insurance policies, and choosing one that suits your requirements. However, you have a business to run. If time is your worry, a car insurance quote comparison website will ease the comparison process by a great deal. It uses basic information about you to look for the best pricing of insurance offered in your surroundings.
Insurance companies also often have commercial insurance policies suited for businesses. These policies usually consider every employee to be a potential driver, so they charge and provide more liability protection. For these policies, the registration of cars isn’t the same as registering a private car, and thus the information provided for obtaining quotes is also different.
5. Work with unpaid interns and hire contractors
Hiring unpaid interns will save you money while increasing your company’s workforce. This also benefits interns’ careers as they gain experience from working at your company. Several entrepreneurs also prefer working with independent contractors to hiring employees. Contractors’ pay is not to be associated with payroll taxes. If the definition of a contractor given by the Internal Revenue Service doesn’t match your contractor’s description, you might be penalized.
It is indeed a great idea to venture into entrepreneurship in your youth, as it is when you have a great amount of freedom and enthusiasm with no responsibilities to hold you back from taking risks. However, it is also a time when resources are scarce, and you will have to economize whatever financial resources you do have. The simple tips and hacks mentioned above will assist you in saving money for your enterprise to be successful.