Running your own business can be an amazing journey, but it's also full of different obstacles and pitfalls.  

The stat saying that only about 50% of businesses survive the 5-year mark perfectly illustrates how uncertain and risky entrepreneurship can be. 

You'll have to handle a number of different issues and tons of admin workload on a daily basis. But besides all that, you'll be responsible for managing your business finances. And that's where things can get tricky. 

While you don't need a finance degree in order to build a thriving business, achieving a certain level of financial literacy is a must.  

Knowing that 82% of businesses fail due to cash flow problems puts things into perspective. 

Here are some tips to help you deal with your money matters properly.

Plan for Success

Most small businesses have limited finances available. 

However, you can overcome this issue by developing a comprehensive financial strategy. In other words, it's possible to maximise your opportunities if you carefully plan how you'll use the resources you have at your disposal.

To be able to do this, you will need a big-picture approach. This means determining your business’s strengths and weaknesses so that you can allocate your resources in a manner that will allow your business to grow. 

For example, deciding whether to outsource certain tasks, adopt new technology, or hire more employees requires careful consideration. That's why it's best to enlist the help of an experienced financial planner to prevent making a costly mistake that will have negative consequences on your business down the road.

Create an Emergency Fund

We live in uncertain times. The world is still reeling from the pandemic that shuttered numerous businesses and led hundreds of thousands of entrepreneurs to the brink of bankruptcy. 

If you don't want to become a part of that grim statistic, it's essential to start building an emergency fund right away. So, instead of burning through your entire profit every month, put a certain amount into your savings account. 

This way you won't have to worry during the slow months as you'll have your nest egg to help you make ends meet until your sales take off again. 

It's best to always have a reserve to cover 3 to 6 months of operational expenses in case revenue stops coming in regularly. 

Having such a comfortable financial cushion, you can fall back on in times of crisis will allow you to be more relaxed and focus on your long-term goals. 

Keep Your Business and Personal Finances Separate

Separating your business and personal finances is a golden rule of good housekeeping. 

Here are two main reasons why you should never blur these lines: 

• Tax reasons. It's hard to track business expenses if you don't have a separate business account. Just imagine going through a number of different transactions trying to figure out whether you used that money for personal or business purposes. This means that you can also miss out on significant tax write-offs.
• Personal liability. Even if you opted to operate as an LLC or corporation to keep your personal assets safe in case something goes wrong with your business venture, blending your personal and business accounts is a bad idea. For example, if there's legal action against your company and the court fails to clearly distinguish between your business and personal finances, you risk being held personally liable for any debts incurred by your company. So, in order to protect your personal assets, make sure to keep a firm line between personal and business accounts.

Limit Your Expenses

Getting a new business off the ground is a challenging process. 

So, it's crucial to prepare yourself for living within or even below your means until your business starts generating profit.

In order to save enough money to cover operational costs and living expenses for the first couple of months, you should start tightening your belt well in advance. Even after you secure a stable revenue stream, it's best to save as much money as you can because that will allow you to invest and expand your business when the time comes.  

These tips can help you plan your finances during the early stages of your business venture and make sure you build a solid foundation for your company.