I get asked a lot about business “finances” all the time. The term “business finance” is vague…its like saying “I eat healthily” in big air quotes. I eat healthy too & I ate a bag of vegan cookies from D’s lectables yesterday afternoon, therefore “I eat healthy”. Context is what matters. Like anything else in life or business, the story we create in our head is what we fear. It’s not our finances, it’s the story we tell ourselves about our finances that we fear. Entrepreneurs fear their business finances like Jason, Freddy Kruger & the guy from all the Saw movies are wrapped up in a creature in their closet. They keep the finance “closet” door tightly closed for fear the Creature will escape. In order for you to really get what you want out of your business, whether that be flexible time with the family, ability to pursue a wood whittling hobby, a need to change the world or whatever it is, you need to look your business finances in the eye. Don’t make the monster bigger than it is.
The first thing I tell new business owners is “make sure you have separate cash & credit card accounts for your business”. You might be thinking “well that’s silly & super easy”… Yes, yes it is & far too many new entrepreneurs & business owners do not heed this warning. A Separate Checking account & credit card account is the first step in “understanding your business finances”. Find a credit card with great rewards, free miles or cash back or whatever floats your boat, but get one. Use the local bank you have your house accounts in or a totally separate bank, just open a business account. I can give you my thoughts on the national versus local banks, but that’s for you to decide. I will point out that regardless of the bank, make sure to build a relationship with the local branch or individuals working in it. There may be a day down the road where you may want or need to borrow money for expansion & that is not the moment to try & build a relationship with your financial institution. You will quickly find you don’t have the winning poker hand for that negotiation.
Separate your bank accounts. Deposit the money you earn from your business, whether it be a service or product business & pay all of your business vendors out of this account. When you need to “pay yourself”, another taboo topic for another day, you simply “draw” the funds out of your business account & deposit into your personal account to spend or pay house bills. It’s that easy. Most entrepreneurs make this far too complex, but that is your business finances at its simplest.
Non-financial tip of the day: Build your team of trusted partners sooner rather than later. Connect with & find great accountants, attorney’s, bankers, etc. to support you on this journey. You CAN NOT & WILL NOT be able to do it alone. You don’t want to be scrambling to find a great lawyer to defend a law suit once you’ve been served by the Constable. It’s too late.
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