Home Money & Finance 3 Essential Money Management Tips for Entrepreneurs

3 Essential Money Management Tips for Entrepreneurs

by Olufisayo
Money Management Tips

Some things go together like beans and rice, peanut butter and jam, or wine and cheese. Your personal and business finances on the other hand? They’re more like oil and water.

To be fair, personal savings play an important part in getting your business off the ground. Like a lot of entrepreneurs, you probably founded your company with savings, but relying on them to finance your daily expenses isn’t practical.

If you’re ready to make the split, check out the advice below. Here are three tips to help you manage your money better.

1. Learn How Your Business Credit Score Works

If you compare how a personal line of credit works to a business line of credit, it’s easy to see them as identical products. They both give you extra cash to tap into when you can’t afford an expense or repair.

While they may share some overlapping features, they play very different roles in your finances. One may affect your personal credit history, while the other may affect your business score.

Your business credit score is an important number. Much like your personal rating, it informs financial institutions of your borrowing history. What they see sets the rates and terms you end up paying.

Generally, your score falls on a scale of zero to 100. What number you get reflects your payment history and trade lines on company accounts—not personal ones.

This means the personal line of credit you take out to cover an unexpected emergency expense won’t show up on your company’s file. You can’t leverage any good points earned here to help boost your company’s score.

That also means the opposite is true. The loan you take out to purchase the necessary equipment won’t show up on your personal file.

Once you understand how your behavior affects your score, you can start using your business line of credit in a way that helps impact your credit history positively.

2. Open a Separate Checking Account

The money you borrow is hardly the most important thing in your financial ledger. The cash you earn to pay bills — and yourself — scores high on your list of priorities, too.

Putting this money, plus any loans, in a separate checking account will help you keep track of your cash flow and your expenses.

Although it may seem like a thankless job at the start, you’ll be happy you did it once tax time arrives. Having a separate account that provides a clear snapshot of your finances will make it easier to file your report with the IRS.

3. Pay Yourself a Salary

This piece of advice may seem obvious. Everything you earn, minus expenses, is your money, after all.

But this mindset can muddy the waters. It’s hard to keep track of just how much you earn if you never receive a paycheck.

Transferring a specified amount from your business account to a personal checking account can make it easier to maintain that separation of finances. This tip will also help you stick to a budget in both your professional and home lives.

Becoming a self-made entrepreneur is a watershed moment in your life. It signifies the end of your 9–5 grind, lining someone else’s pockets, and the start of doing something you love, making money for yourself.

This financial turning point isn’t without challenges, but you can weather any test by keeping in mind these essential money-management tips.

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