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March 02, 2010

Money Management

This week in our Strategy, Entrepreneurship and Ethics class we've been asked to take a look at a very exciting and compelling subject which affects every business–the basics of money management. I know, it's a mega-yawn. I wonder how many businesses fail due to the fact that money management is not only daunting for most of us, but an outright bore as well? I found this article to be basic, but pretty useful still. As someone who hopes to start my own small agency someday, it's nice to have all this information in one place.
Much of what's covered here is the concept of cash flow; in other words, making sure that your accounts are in order, your books are accruate and up-to-date, and a few safety measures such as opening a business line of credit. Business lines of credit are very useful if you're just starting out and need to buy supplies or equipment, or even pay employees for the first several months you are ramping up. If your credit is stellar, it can get you through the initial stages of start-up, and through any rough spots or dry spells in the business, which are inevitable and hard to predict. This is an incredible tool to have on your side, but it must be taken care of and not abused.
Another thing the article points out is the benefits of hiring an accountant. This can't be overstated! It takes a very special kind of detail oriented person in order to do the books and keep things clean and tidy–not everyone has the patience, time, skill, and vigilance to manage this important job. Outsourcing is the key to growing your business, and many talented and skilled people have no talent in this area. Don't be afraid to hand it off to someone who not only enjoys it, but will do a great job (and possibily save you money).
Securing payments. As a freelance designer, it took me years to get this right. Don't be screwed over–get a contract signed up-front, an initial deposit is nice but not always appropriate. At the very least get a Purchase Order opened with clear descriptions of the work to be done, a timeline, and an estimate of cost and hours. I have never done a job where I didn't receive payment, but I know some who have. Don't rely on people's word, get it in writing.
In closing, I think money management is like anything in life, it gets easier with practise. Don't let this world intimidate you, it's actually fun once you learn to channel the power of banking logic. The alternative is to be a 'wage slave', never realizing your true potential. Starting a business is challenge I hope to one day experience.

Posted by dsr at March 2, 2010 10:20 PM