Finance Tips for First-Time Entrepreneurs

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If you’ve finally made the decision to leave your day job and pursue your business idea in earnest, then there are going to be countless things you’ll need to think about and organize before your idea can really come to life.

Though you could probably think of new and innovative ideas all day, all the numbers to track, livelihoods to maintain, and costs to manage can make business finances feel like a chore. Though it’s rarely an entrepreneur’s favorite job, managing your finances in those early days is one of the most important parts of setting your new venture up for success.

In this post, we’ll run through 4 of the most important finance tips for first-time entrepreneurs.

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1. Automate your financial processes wherever possible

As you’ve probably heard before, time (or rather, the lack of it) is one of the biggest enemies of new entrepreneurs first starting to make their business idea a reality. 

In the early phases of your business, you’re going to have to carry out countless tasks that you don’t have the funds to delegate, leaving you less time to focus on the more innovative projects that will set your business apart.

By automating your invoicing, bookkeeping, tax records, expense management, and more, you’ll be able to save precious time that can be invested in other, more essential areas of your business.

There are countless accounting tools like QuickBooks that can help take the manual work out of all your financial processes. Many entrepreneurs integrate business banking with QuickBooks to automate transactions and have access to their revenue, saving time and effort from manual transactions and having better income management of their monthly sales, returns, discounts, and more. Even if you’re not in a position to acquire new tools, there are some great tips and tricks you can apply to software like Excel that will give you all the same benefits.

While it may not seem like much, that saved time can quickly add up. For example, if you’re able to save just one hour a week on invoicing, this will give you a whole extra working day in 2 months, and a whole extra week by the end of the year.

2. Keep your business and personal finances separate

The importance of keeping your professional and personal life separate has countless advantages, and the same principle should be applied to your business and personal finances.

If you’ve only just started pursuing your business full-time, or you’re doing it alongside a day job, then it can be hard to draw the line between your personal and business cash flow. However, even if your business is little more than an idea, separating your personal and professional finances as early as possible is always a smart move.

By opening a new online business account through a provider like SumUp early on, you’ll not only make record keeping much easier, but will also help separate your personal liability from the venture, and protect yourself from personal difficulties if things turn sour for your business.

3. Simplify your record keeping

Some of the most common financial difficulties faced by new entrepreneurs stem from an overly complicated approach to record keeping. As business starts picking up, make sure your books are centered around the simple principle that profit is your revenue minus expenses.

You may have read materials that put a lot of emphasis on profit per input or per hour, gross margin analysis, and so on. These kinds of metrics can give you some great insights when your business is a little more developed, but it’s always best to start out with simple records, and work your way up to a more complex model.

As you progress and optimize your record keeping for the needs of your business, remember the decision to track new metrics should always be done to serve a specific need, not just because it’s the “done thing” according to entrepreneurs who are running more complex and developed operations than you. If you over complicate your record keeping in the earliest days of your business, you could be creating more work for yourself without any real benefit.

4. Create and maintain an emergency fund

Accessing capital has always been a major challenge for small business owners just getting their feet wet, and even more established businesses often lack the savings to cover their expenses for a month without income.

If you’re not prepared with an emergency fund, some unforeseen disaster that stops you turning a profit could force you to close your doors in a frighteningly short space of time. This prospect became a lot more real after the economic shock of covid, which forced countless promising ventures to shut down within their first year of business.

If you’re launching your business on the strength of your own personal capital, then keeping emergency liquid cash in reserve can be a challenge, and in turn, easy to overlook. However, the financial strain required to build an emergency fund will be nothing compared to the heartbreak of losing your business to unforeseen circumstances.

So, how much will you need to store away to make sure you’re covered? That depends. For a sole proprietorship, or a business that employs less than 10 people, an emergency fund that will cover your operating expenses for 3 months is generally a good target to aim for. 

If you have to issue invoices and the scope of your projects varies from client to client, then adding on a month or two to this figure can be a good way to insure yourself against accounts that might be late on payments. If your business is very seasonal, then you’ll likely need a much larger emergency fund to cover the risk of being short-handed in your off-season.

Take some time to research the challenges faced by people in your industry and network with more established entrepreneurs, and you’ll soon have a well-informed target for your emergency fund.

Final thoughts

We hope these tips have helped you navigate the tricky subject of business finance, and answered some of the pressing questions you have about managing your venture’s cash flow. 

Keeping a handle on your finances can be tough in the early days of your venture when you’re having to juggle so many other tasks, but by taking a proactive approach from the day you launch, you’ll be able to steer clear of countless financial challenges further down the line.

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