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Money Management: How To Successfully Begin A Home Business

New businesses in the United States surged during the pandemic
Source: New businesses in the United States surged during the pandemic (PIIE)

Have you ever done business from the comfort of your home? Do you know, a majority of people in the US operate from home in order to earn a living post pandemic? As a matter of fact, more than 75% of such businesses in the US began to operate from a spare bedroom, garage, basement, or even backyard of an old house. You will be surprised to know that, not only for small businesses, even big brands like Apple Computer, Baskin Robbins’ had such a small start.

Things to consider and prepare yourself accordingly before starting a home-based business

In a home-based business, the owner is held solely responsible for anything major happening, which includes the success or failure of the business model. The owner has to face grievances if the salary for the staffs does not come at the end of the month. More often than not, people state from a general perspective that money management remains to be the most important skill when it comes to home managed businesses. At the same time, working on a feasible business plan remains to be important, while cash and client management should be an aspect entrepreneurs need to focus on.

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Brex: The Future of Business Finance and Cash Management
Source: Brex: The Future of Business Finance and Cash Management

What can be some valuable money management tips in your home based business?

In order to encourage your entrepreneurial journey, money management happens to be a great incentive. Therefore, following perfect tactics to encourage income and expenditures should be prioritized. At the same time, allocation of resources should be done optimally so that one meets the business objectives.

  1. Fix Your Salary as an Entrepreneur.

In order to motivate yourself, you should prioritize your own compensation. Understand that you play a pivotal role, and fix your salary in accordance. Never ever compromise on your own salary package is the new mantra in the US, post pandemic.

  1. Invest your finances in earning profits.

This remains to be a priority, as experts reveal that fruitful investments can really pay off in the long run. Investing in growth opportunities remains to be some of the best options that an entrepreneur can think of. For instance, business consultants’ reveal that a strategic tie up with the market leader can be a good investment, rather than investment on infrastructure expansion.

Edgar Collado (Edgar), Chief Financial Officer of Tobias Financial Advisors, in a similar context had acclaimed, “A small business that wants to continue to grow, innovate and attract the best employees [should] demonstrate that they are willing to invest in the future,” he said. “Customers will appreciate the increased level of service. Employees will appreciate that you are investing in the company and in their careers. And ultimately you will create more value for your business than if you were just spending all your profits on personal matters.”

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  1. Choose your loans wisely

It is always advisable that a small business entrepreneur starts to work with an approved bank loan. However, while taking a loan, one should calculate the rate of interest, and understand the risk associated. Deployment of finance therefore remain to be a big issue and for small business entrepreneurs it is advisable that the return on investment should be calculated carefully to meet desired goals.

  1. Improve the cash flow.
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As your company grows, you should take a clear note of improving the cash flow. Therefore, pay for your credit cards within time, while do timely transactions with the customers. Do not increase your bad debts either. Follow up the customers, and close the sale after you receive the payment.

  1. Generate bills immediately after a sale transaction happens.

Every small business owner should concentrate on realizing payments immediately after a sale is closed. Generation of a standard instrument is much required to have a tab on the price of the product or the service being sold and the tax associated.  “Too much cash tied up in unpaid invoices can lead to cash flow problems, a leading cause of business failure,” claimed James Stefurak, Managing Editor of Invoice Factoring Guide. He continued to further emphasize, “If you have a chronic late-paying customer, which we all do, instead of badgering them with repeated invoicing and phone calls, try a different approach. Change the payment terms to ‘2/10 Net 30.’ This means if the customer pays the invoice within 10 days, they receive a 2% discount off the total bill. If not, the terms are full payment due in 30 days.”

  1. Pay your taxes in easy monthly installments. 

If you have a problem in making lump sum tax payments, then convert it into easy monthly installments. Doing this will help you to plan your business operating expenditures, at the end of the day.

  1. Monitor your balance sheet.

Monitoring your balance sheet is the most obvious practice, and a small business entrepreneur should do it religiously at every phase.

Terence Channon, principal consultant from NewLead LLC, clearly stated “Do not neglect bank reconciliations and spending some time each month on reviewing outstanding invoices,” said Terence Channon, principal consultant for NewLead LLC. “Failing to do this, especially if a bookkeeper is involved, opens up the business to wasteful spending or even embezzlement.”

  1. Prioritize Returns while making justified expenditures 

Making justified expenditures remains to be a priority for the small business owners. Deborah Sweeney, the reputed CEO of MyCorporation, constantly warns the entrepreneurs regarding undertaking huge expenditures pertaining to the context. She emphasized, “Focus on the ROI that comes with each of your expenditures,” She continued to say, “Not doing this means that you can lose money on irrelevant or bad spending bets. Know where you are spending your hard-earned dollars and how that investment is paying off. If it isn’t paying off, cut back and spend a bit more on the initiatives that do work for you and your business.”

  1. Set up positive managing habits.

Mitigate the risks taken while investing in a business, and this is the buzz for the day. A small business entrepreneur can choose to make investments positively and therefore maintaining financial protocols happens to be really important. Putting in strong business control can work well, while mapping deviations from targets set is also important.

  1. Plan the future move. 

Planning for the future is what a business is all about! Therefore, experts from the related field state that making a roadmap should be worked  on by the entrepreneurs. Taking into consideration the contingencies, is important, while planning ahead on mitigating risks remains to be the need of the hour.

Conclusion

If you are an entrepreneur, experts suggest that managing finances effectively is to be focused upon while driving business. Business finances are not only about earnings, it is about planning, engaging, investing and reinvesting to achieve business outcomes. Therefore an entrepreneur should act accordingly and follow the desired path.

[To share your insights with us, please write to sghosh@martechseries.com]

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