This is the second post in a series about Finance for Bootstrapped Companies.
One of my favorite posts until now was the original Finance for Bootstrappers post. I decided to make the topic into a series of posts because it’s such a broad and expansive topic that it couldn’t be adequately touched on in a single post. In fact, it should probably be it’s own blog. So there’s an idea of any aspiring bloggers. On with the tips…
Businesses Have Budgets Too
I whole-heartedly believe in the value of a budget for your business. Having a budget gives you an initial idea of just how much money you can spend before the month starts. Without a budget it’s entirely too probable that you’ll end up spending more than you make at some point, and once you do that it’s hard to get back into the black.
Your budget should include absolutely all income and expenses that you realize in a month. If there is an entry in your checking account then it should be in your budget as well.
You also have to understand that a budget is a monthly task and the results will differ each month. No two months are the same. Incomes will vary each month, even if slightly, due to accounts payable terms, holidays, etc. The same goes for expenses.
When it comes to budgeting (and business finance in general) I really rely on the advice of Dave Ramsey. His thoughts on personal finance translate very well to business situations as well.
Have Some Savings Available For Emergencies
Emergencies and unexpected expenses do come up, so you have to be prepared for them as best you can. You should have a money market account, separate from your main checking account(s), that you accrue emergency savings in. Even if you can only accumulate a couple hundred bucks a week then it’s worth it.
I advise putting it in a money market account simply because you will earn some small amount of interest. You shouldn’t put it in a non-liquid account or invest it in stocks because it may not be readily available should an emergency arise. If you want to do business investing then you should have another account just for that purpose.
Stay tuned for the next entry in this series. What business finance and financial management tips do you have? Do you have an emergency account for your company?