Business Column By: CEO LaNisha Rene of LR Consulting Enterprise, LLC
Society identifies finance as the management of revenue or the activity of providing funds or capital. Today, I ask you, what are the fundamentals of finance in your life? This is an important question to ask yourself to determine the best uses for it or the best ways to gain more of it. Learning the basics before you tackle the full responsibilities of finance is key and can be extremely rewarding in the end. As an Entrepreneur, having an understanding of finance can help your business prosper during the good times and succeed during the bad times. In this issue, we will discuss the importance of finance from a business and personal aspect. First, you must learn how to handle your personal finances before you can tackle the extreme responsibility of how to handle your business finances. As you read further, you will learn essential tips, differences, and tools that will help manage your personal and business funds.Before opening a business account, you must know how to spend your money wisely, how to budget, balance a checkbook, create goals, and of course, how to save money in your personal account. Think of it as building a brick wall, the height of the wall is considered your savings goal, this goal will serve as your objective. The bricks can be considered the amounts of money you will save at a time, depositing $10.00 to $50.00 a month, and the cement will serve as your actual bank account, this is what holds your bricks together and allows you to reach your walls height. The above metaphor is important to understand because you can associate your finances with the steps it takes to build a brick wall. Now that you have figured out how to take pride in building your finances, we move on to separating them.
Your next goal is making sure, while you’re still saving; you choose the appropriate accounts to continue your savings goals. Your checking account will serve as your personal bill paying or primary necessity account, and yes, this account does require a set goal in order to handle your monthly deductions.
Determine what your monthly revolving accounts and house hold bills total. The best way to keep this account active and in good standing is by knowing your costs and having at least an additional $200 to $500 after these monthly deductions have been taken out just in case of emergencies. A savings account will serve as the next account to open, this account will also need a goal set, the difference in how you will save in this account from your checking account is you will not touch this money.
This is your special account, whether you’re starting a business or making an investment. It is essential to first meet your goal and only withdrawal what you need at a time. I will reiterate, this money is not to be touched until you reach or exceed your goal and should only be used with another goal in mind, a goal that will recoup or double the money you withdrew such as an investment i.e., buying a house, starting a business, taking out shares, purchasing stocks, etc.
Reality is - you can’t possible tackle the tasks of a business account without holding yourself accountable with your personal account first. The tips above are basics and will serve as your learning guide. Business finance will follow the same techniques. However, after you build your brick wall, you will separate and distribute your cash flow differently.
Let’s begin with your business checking account, this account is important because this is where you will receive capital and pay for your businesses overhead or expenses. You will actually need this account prior to opening a savings account for your business. The savings account mentioned for your personal account is a guide to help you learn to save money and set realistic goals. Though opening a business savings account is a good suggestion, the best type of account to open is one the business can benefit from besides the checking such as a line of credit.A line of credit is the best way to build credit for the company without putting your business into major debt and the best part is that you only use what you need or what you can pay back at a time. I will not suggest a new business take out a loan or business credit card until you have built a substantial wall with enough capital to handle monthly expenses, emergency money, and operating costs for at least 3 months.
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