Below are the top 26 financial tips entrepreneurs wish they knew earlier, straight from the pros:
1. Manage Your Inventory Efficiently
James Cassel, Co-Founder, Cassel Salpeter
As entrepreneurs, you should always check your inventory levels and make sure that they are efficiently managed. Reduce your inventory during a downturn to help free up capital, avoid obsolete products, and maybe even cut down your warehouse/holding costs.
2. Keep Your Business & Personal Finances Separate
Yoko Kawamoto, Finance Staff, Founder’s Guide
Even at the early stage of your business, you should strive to keep your business and personal finances separate. Open a bank account intended solely for your business, and as soon as you can, get a business credit card as well. If you need to use your personal credit card because you are not yet eligible to open one for your business, just make sure you monitor and record your business expenses and account for them properly.
3. Provide Customers With Convenience Through Technology
Julie Pukas, Head of Commercial Product Integration, TD Bank
Entrepreneurs should look to merchant solutions providers that can keep them on top of the latest payments trends and POS systems, many of which offer features beyond just simple payment processing. By adopting technologies that parallel those of larger organizations, but at a smaller scale, entrepreneurs are able to deliver the convenient experiences consumers have come to expect. Contactless payments, for example, offer increased security and reduced transaction time, allowing businesses to focus on other important tasks while pleasing customers with a shorter checkout time. Entrepreneurs and business owners should start by identifying weak points in their current processing systems and find a merchant solutions provider that has the ability to tailor service to meet unique needs.
4. Create New Cash Flow Without More Debt
Viktor Monder, Founder, Monder Law Group, PC
Creating small amounts of cash flow through your investments early on will help push a marketing campaign that many entrepreneurs would normally not have had the budget for until years down the road. Entrepreneurs may find the journey to be difficult and getting into debt feels like the easiest option at times. But if you want to build a sustainable business, you should learn to diversify and begin a collaboration effort to bring in additional cash flow while you are building the business. Figure out ways to leverage ideas to create small streams of income to fund your business and try to stay out of debt as much as possible.
5. Be Careful Using Debt to Fund Operations
Tony Schy, Chair, Vistage International, Inc.
As a small business owner, the first time you take on debt and later work to pay it back, you are met with a rude awakening. Normal accounting rules allow you to deduct the expense that you funded with debt at the time you incur the expense. But later, you have to repay that debt with after-tax cash (profit). If you funded operations with debt, you could find that servicing that debt consumes a large portion of your after-tax cash flow. This can lead to an income statement that looks good, but a cash flow statement that looks terrible.
6. Know the Importance of Accounts Receivable
Ben Ricci, Managing Partner, Stevens & Ricci, Inc.
In setting up your business make sure you invest the time to develop a strong credit application and invoicing/payment policies – and stick to them. Accounts receivable can be used strategically to increase revenue (cash flow) and minimize bad-debts. Learn to manage, control and even profit from slow-pay and no-pay customers with incentives to pay on time and penalties for slow or no payment.
7. Budget More Time & Money for Setup
Jonathan Rosenfeld, Founder, Nursing Home Law Center
Probably the biggest bit of advice for a new entrepreneur is to budget significantly more funds and provide more time towards their initial set-up and opening. Opening and getting a business off the ground always costs more and takes longer than anticipated. The people who are willing to endure and see the projects through are the ones who will be successful in the long-term. It’s important to know that things will be difficult at the start, but that’s what makes the reward that much sweeter, because you earned it through a lot of hard work and risk.
8. Invest in Health Insurance
Sally Poblete, CEO, Wellthie
Entrepreneurs should invest in health insurance because it supports their employee’s health and productivity. Employees who feel well directly correlate to their performance at work and the company’s bottom line. Health insurance is an important benefit that employees value in seeking a job – thus, it helps with attracting and retaining good employees. Even for sole proprietors, solo entrepreneurs or freelancers, getting health insurance is an important step in securing both your health and financial security. Getting access to full coverage for preventive, routine, urgent or more serious medical conditions can be costly if you pay for it out of your own pocket, and it can even lead to bankruptcies for some.
9. Identify Your Market Before Developing a Product
Ross Cohen, Co-founder & COO, BeenVerified.com
It is important to spend time identifying your target market before getting your business up and running. Don’t spend years developing a product that doesn’t have a distinct customer base. Some businesses find it difficult to determine their target market. Instead, most of them just went after the broader consumer market.