How To Handle Financial Challenges as a Start-Up Entrepreneur?

So you're an entrepreneur but you don't know how to properly budget for your business? don't panic. Take out a notepad if you're old school, for the youth just open your notepad app on your device because were about to take a deep dive into what exactly is financial management and why it is important if you are planning on becoming an entrepreneur.

Learn Money - The first thing you need to do is learn how money works by reading up on books such as The Richest Man in Babylon, this is the book that taught me that I need to pay myself first before I pay everyone else for instance my bills, mortgage etc. Another great resource is Nicolette Mashile's YouTube channel called The Financial Bunny. She covers various topics around financial management that include but are not limited to shares, credit and managing debt.

Financial Management Tools - If you are only just starting out on this entrepreneurial journey, you will be wearing multiple hats which can hinder the growth of your business. I recommend you start using Xero a powerful online accounting software that can cater to your small business needs such as calculating VAT transactions with the use of SARS e-filling service, the software has multi-currency functionality which allows it to pay and get paid in over 160 currencies with multi-currency accounting, send invoices, data capturing, paying bills etc. Xero offers multiple payment options so it is not limited to just small businesses.

Learn How to Budget - First thing first, you need to determine how much money goes into your business account on a monthly basis. Secondly, you have to identify your fixed costs which will be your rent, salaries if you already have employees, and wifi because you need the internet however this depends on what type of business you are running. Thirdly, make sure you include variable costs such as electricity and or freelance workers. This is the surface-level knowledge of budgets. If done correctly businesses will be able to track spending habits, create spending goals and factor in seasonal and industry changes.

Understanding Credit - Credit is money given to a business by a service provider such as a bank. The following three elements should be considered. Time, Risk and Cost. The Risk with borrowing money is will your business made enough money to pay the bank back. The concern with time is the service provider will include a time period where you have to pay the money back for instance 6 or 12 months if your business is unable to comply it may be liable to a penalty. The remaining factor which is Cost must be observed carefully, start-up entrepreneurs must understand that there will be different types of costs that need to be paid such as service fees, interest rates as well as initiation fees. Once all of this is understood only then should you consider using credit for your business.

Financial literacy equips entrepreneurs with financial principles such as managing debt, applying savings techniques, planning for your financial future, understanding and calculating compound interest and even understanding the principle of time as money.