As this wave of entrepreneurship keeps moving and moving, there are different types of startups that are surging.
Either if you are aiming for a startup, or you are a solopreneur, knowing how to manage your finances is key.
When I started this “entrepreneurial process“, so can I say, I actually didn’t feel like an entrepreneur.
I learned how to register myself at the mexican Tax Authority for my business registration, in order to open a second branch of the family furniture business.
Being the second generation of a family business, gives the unfair advantage, I say, of starting a business.
Is it me, just giving less value to being part of a family business?
But the thing is that I feel more an entrepreneur from someone who start a project from scratch.
In the case of family businesses, you might be supported financially by the already established business.
So, how to fund your own business?
Well, if I tell now my different journey now as freelancer, I can say that one has been more of an entrepreneurial path.
Before going to Germany for the second time in 2016, I already new that I had to reach certain amount of money to pay for the student visa and to cover my expenses while living in Germany.
I already had half of the amount in savings, but I still needed to get the rest of the money.
In that time, I was full-time focused on the second branch of the furniture store.
If you know how some family business run, then you might also know that sometimes parents usually don’t give a paycheck to the children that work at the business.
Such a pitty, isn’t? But at least I was paid with food and shelter.
So basically, my store was just focusing on “reinvesting to make your store grow”.
That was what my mother said, but I wanted to go back to Germany.
Since I already knew that financial management was not a strength of my mother, I decided to be aware and take full control of the finances of my own store.
I set aside 5% of the monthly revenue to create a cash back-up, and I was paying always on time to my suppliers.
The business was running smoothly, but I still wanted to go to Germany.
When I finally got accepted to study a master in Heilbronn, I needed money, so I was thinking:
“Fuck it, I am taking my store savings and use it as a deposit for the visa”.
When I told that to my mother, (without the fuck it, of course), she just answered with a “there is your paycheck”.
What I actually started as a simple savings excercise, become like my financial life savior to obtain the german student visa.
Now that years have passed, and after a tough 2020, I had a meeting with my boss in Germany where I asked her if I could do freelancing from Mexico.
What it might be considered as a meeting, it eventually could also be considered as a friends talk, or even as a business pitch, it would depend as how it is seen.
Who would it known that now that I am back in Mexico after 4 years in Germany, my employer would also now be my business partner, if you want it to see it in that way.
And now it feels nearly more to be an entrepreneurial experience, since I didn’t require the support of my family business finances to have this mini-startup and keep developing my marketing services.
From what I have learned now as a freelancer, is that the income that I earn, I do have to reinvest it in sources that could generate more revenue.
After all, learning from our parents lead us to some good practices, but it is the role of the second generation to create their own path and learn how to manage their own finances and business.
Financial management refers to the discipline of planning, organising and controlling all the financial resources of a company.
It is then the aspect where the responsibility for decision making regarding investments, savings, financing, budgets, and more are taken into account.
Good financial management is a fundamental aspect in any type of company, no matter if it is a small, medium or large one.
This is an aspect that will ensure profitability and the fact that it can last over time, which is what every entrepreneur wants to achieve with his ideas.
In order to guarantee higher profits, it is always important to have a team of people specialised in financial matters.
Although the entrepreneurial path is often a lonely one at the beginning, it never hurts to know the relevant aspects and to put them into practice.
However, it should be noted that within companies, the functions of financial administration are carried out by a manager, or financial director, and it is this person who is responsible for controlling each and every one of the movements, within this aspect, in the organisation.
As we have mentioned before, when we start a business we are often ourselves and our work team is our mind. In that case we must become a professional in everything.
With these financial management tips you are sure to be on the right track to good decision making:
Knowing how to calculate the assets available in a business is a vital action, as these are the elements that add value to the business and, if they were not there, the business would not exist.
It must be understood that everything from office supplies to paper can be considered as such.
There are several reasons why one might want to calculate total assets.
For example, in the case of a loan application.
In many cases the lender asks for the total value of the assets to be reflected in the balance sheet.
The moment you determine the value of your assets you have the real knowledge of how much money your business has the capacity to raise if you were to sell your assets, an action that is taken when the going gets tough.
Similarly, calculating your assets will be useful in other cases.
For example, when buying an insurance policy, in case you need to provide collateral for a loan, and in case you need to file for bankruptcy, which we hope you will not.
Another tip of the financial management for entrepreneurs is based on the need to know the source of income clearly from the outset.
If there is no income, one cannot really speak of a business as such in general terms.
Even if the venture has not yet been launched, and is only managed as an idea of what it could become, it is always necessary to ask ourselves if we know what our source of income is, with a more than explicit answer.
Many entrepreneurs launch a project every day which, although it serves to cover some existing need or other, people are not really willing to pay for it.
Among the most common reasons is the fact of competing against public services, or against people’s lack of habit or product knowledge.
To know your source of income, it is important that you take the time to analyse who your customers are going to be, what products or services you are going to offer them, and at what prices you expect the exchange to take place to the satisfaction of both parties.
And in this way, even if it is a bit daring, you should also ask yourself questions such as, for example, how much you could sell in a month and if that will be enough to cover your expenses.
Always understanding that there are recurring, one-off and passive incomes, recognising which of these is yours.
When you keep track of monthly expenses, you have the opportunity to obtain important information about the profitability and performance of the activities you are carrying out. It also helps in planning and decision making for future investments.
However, cost control is not one of the easiest things to do. It requires discipline and a lot of organisation.
Depending on the dynamics of the specific enterprise, this action may be more or less difficult.
But it is a worthwhile action, because no matter whether it is a small, medium or large business, controlling expenses is seen as the most effective way to maintain financial and organisational strength, as it creates a tendency to spend less and make more profit.
A tip for financial management today is to rely as much as possible on the tools offered by technological progress.
Such is the case of Zoho Expense, an application that generates expense and regular reports, all in a simple procedure.
With an intuitive app, simple to use, and unique features, with a couple of clicks you will have in front of you the expenses of your company, distributed in percentages of the different parts that will help you to manage correctly the liquidity that your business has.
Of course, we are talking about a very useful tool, and to have full access to it you need to pay about $35.
However, they offer you a free one-month trial so you can find out if its functionalities really suit your business needs.
Many people who have a business venture believe that the right thing to do is to have no debts at all, and they are partly right.
But we know that we cannot always be lucky enough to maintain perfect solvency, especially when it comes to business.
That is why as a tip in financial management for entrepreneurs, we never talk about not having debts.
Instead, it is about making sure that the debts you do have are managed in a healthy way, which, although it does not eliminate them, does not harm the business itself.
Healthy debts are those that have the capacity to raise our credit bureau score, generate credit history, and also increase our wealth.
They are always kept under control, measured, and never paid outside of the time frame in which they are stipulated.
You can start with simple actions such as, for example, paying off your credit card in full before the due date.
Or, in the case of a credit card, paying 30% of it in instalments.
There are many ways to make sure that our debts are not an impediment for entrepreneurs.
In case you don’t already know, when financial management systems are mentioned, we are referring to those that manage and control the income, expenses, and assets of a business to assist the person in charge of it.
Nowadays we have the advantage of having the technology and all the resources it provides us with to be able to carry out a business correctly, even when we have not studied the subject professionally.
Therefore, not using them is undoubtedly a rookie mistake.
In this order of idea, and as we know that you may not know where to start looking, we must mention Bind ERP or Quickbooks as all-in-one management systems.
This means that, with the help of its modules, you will be able to manage inventories, purchases, sales, finances, reports, and much more.
This system offers everyone who wants to use it quarterly subscriptions, so it is an investment every 3 months.
It has four plans that have been designed for the different stages that a business goes through, so that you only pay for what you need, and not for something that you will have left over.
You can also build your financial management systems with products from CodeCanyon.
In CodeCanyon you can have access to several software code that you can use to build up your own financial management system.