What are the Top 5 Financial Priorities for a new business / side hustle?
So…you want to work for yourself, set up your own business, start a side hustle or just earn more money! Alongside your great ideas, you’ll also need to ensure you have considered the following 5 financial priorities:
1. Produce a short- and medium-term budget
The first thing you need to do is to produce a budget that will get you through the initial set up and at least the first few months of operations. It’s vital for you to ensure you have enough cash available to pay any costs of set up that are required.
For example, in some cases these costs will be quite minimal and will be limited to only a few hundred pounds for creating a website, setting up an email account, registering with Companies House etc.
2. Working Capital / Set Up Funding
Once you’ve identified the expenditure that will be required in the early phases of your operation, you’ll need to figure out how you’re going to fund them. As mentioned above, those costs may be relatively small and manageable from a Directors Loan, or you may need to secure additional funding from elsewhere (which may require a detailed business plan as backing to secure an investor).
It is very easy for businesses to fail to succeed early on due to a lack of sufficient planning and financing.
3. Recording your income and expenditure
Once you’ve identified the costs you need to incur, and how you’re going to fund them, you’ll need a way of recording your income and expenditure. A business bank account is always a good idea but accounting software such as Xero, is tremendously helpful and very easy to use.
Using this software from the start of your operations will make your in-year monitoring and reporting more useful and straightforward.
4. Track your income and expenditure against your budget and amend where necessary
Although you’ve set your budget and you’re recording your income and expenditure effectively, your work isn’t done! It’s vital that you then continue to actively track and monitor your progress against your budget to ensure the following things:
Expenditure isn’t above your expected income
You have enough cash coming in to fund your expenses going out
That you can flex your budget for all the extra income you’re making!
5. A plan for sustainable growth
Once you’ve done all that, you can continue to focus on your business to generate sustainable and long-term financial growth opportunities. Good financial management and planning is a key part of the success of any business and shouldn’t be underestimated.
If you have the basics in place, you can focus more easily on your customers, growth and development.