If you are starting up as an entrepreneur then you may not be accustomed to coping with its financial challenges. You may not have even considered what they might be. Therefore some useful information is contained below with some helpful tips.
Inconsistent Pay Days
The first main difference between working for yourself and working for someone else is the inconsistency in pay. You may decide to pay yourself on a certain day each month and decide on the amount that you will take. However, this very much depends on whether you manage to make that much money in the first place. You may find there are months when there is no money at all, very little money or it is not available until after your pay date. To cope with this, you need to make sure that you have some money behind you, in personal savings, so that you can cover the cost of your bills without relying on a salary.
A business can suddenly have expenses. This might need to bulk buy stock, pay staff, marketing campaigns and things like this. Finding the money to cover this can be difficult sometimes. It is therefore important to have a business savings account, that you contribute towards regularly, so that you have some emergency funds should you need them.
Lack of Cash Flow
A lack of cash flow can be a big problem for many businesses. When you take on a job, you may have to buy materials and stock in order to do it and then not get paid until it is completed. There can also sometimes be problems with people not paying at all. It is good to get payment in advance if possible, or at least a deposit before you start the job and then some of your costs will be covered. Try not to be tempted to dig in to your personal funds or borrow money using credit cards or payday loans to get you through, unless you really have to.
Borrowing money may be necessary for a business. Many start-up companies will start out with a bank loan to get them going. It is best to avoid this if you can, although it is not always possible. Work hard to find the best rate of borrowing that you can and try to negotiate it down even more. Do not be tempted by personal loans as they may be secured against your home and you may lose it if you cannot pay it back. A business loan will be secured against the business and so you cannot lose personal possessions if you cannot make the repayments.