So often do we, as responsible adults, make the mistake of bouncing a check or paying a bill with funds that, through no fault of our own, simply aren’t there. Perhaps a recurring payment slipped our minds, or maybe that dinner and a movie was more expensive than we thought. Sometimes we even like to estimate based on the best case scenario rather than the worst.
While this may occasionally happen in our personal lives, it takes on a much more sinister and potentially hazardous meaning when it’s done in our business lives. The primary concern is responsibilty. Perhaps it makes me sound out of date to say this, but you have a form of social contract with your employees that if they perform the work that you set for them, you’ll compensate them. This can be expanded to include the idea that if they work their hardest, you’ll do your utmost to be upright, honest, and, most importantly, careful that they can continue to perform that work for you. Financial mistakes and overspending can lead a company quickly to ruin, so it’s important to keep a close eye on what money is coming in and going out.
I should preface any advice by saying that this is all generalized and for information on what’s best for your specific company you should speak to an authorized financial advisor. I don’t know what you do for a living or the challenges you face, so please don’t think I have the answer that is right for you.
First thing’s first: budget yourself. Your company, especially if you’re just starting it, needs to keep a close eye on what it’s spending and how it plans to spend in the future. Until you have a steady income and are turning a profit, you most likely are spending money you’ve been loaned, a part of which will have to go back to the bank (or whomever you borrowed from) and the rest that will have to actually be used to run your business. If you don’t budget and stick to it, you will eventually either have to ask for a larger loan or close down your company.
The next thing you must do is keep a ledger. This can be anything, really. They used to be large books with heavy covers that a person could use to painstakingly record every financial transaction that affected their business. Today there are new ways of accomplishing the same task, such as a spreadsheet program. There are more advanced computer programs as well, like Quicken or Quickbooks, that monitor your finances even more closely, keeping track of bank deposits, addresses of clients, and a whole bevy of information that most people will not need the entirety of, but parts of will relate to most businesses.
Even newer and more advanced are websites that will do very much the same task as the above such as Mint.com, Wesabe.com, and Geezo.com. These sites are able to help you keep track of what’s being spent, make suggestions on how to maximize the effects of your spending, and be aware of when you’re in danger of overspending or putting yourself in a bad financial situation.
Keeping an eye on your finances will help you avoid in your business the problems that you can occasionally (and only occasionally) get away with in your personal life. It can help you live up to your responsibilities as an employer and continue to grow.
