Bad money habits can ruin business
Sep 22, 2011
When your finances are always in the red, you are more likely to fall victim of scams that promise quick returns. Keep in mind that clean money comes with hard work.
By Sylvia Juuko
Topic of the week:When your finances are always in the red, you are more likely to fall victim of scams that promise quick returns. Keep in mind that clean money comes with hard work.
Have you been dreaming about starting business as a means to multiply your sources of income? If you have been nursing such a dream, it’s also time to take a harder look at how you manage your personal finances.
The way you manage your finances eventually impacts on your business or investments. A lot of people look towards starting a side business as a solution to their bad money habits. While a side business can be a useful source of extra income, it cant thrive unless you drop the bad money habits.
One of the key tenets of running a successful side business is ability to increase revenue while at the same time lower costs. Just like in business, increasing costs through lavish spending that surpasses your available income will result in poor financial health.
Before you take on this venture, it’s important to learn rules of the game in both business and personal finance management.
Related to that, you have to apply the basics of personal finance management like financial forecasts, tracking every shilling, saving a considerable percentage of your income, living within your means among other things.
Unless you get this right, your personal issues will not only divert your attention from running your business, but they will eventually force you to raid your business funds to take care of personal needs. Eventually your business will suffer because it will lack working capital.
In addition to that, this can be made worse if you suffer from a ‘copycat’ syndrome. This relates to starting your business because so many people are running the same.
With this kind of attitude, it will be impossible to ascertain what works and what doesn’t.
Most people running side businesses consider employing unskilled friends or relatives as they concentrate on day jobs.
Most of the employees lack drive and vision for the business and because you are not willing to delegate most of the authority, they have to wait for you to be present for some decisions to be made which impacts on the business.
Given that your business has divided attention and lacks systems that divorce it from the owner, it suffers and may eventually collapse.
Opening a separate account for your business is crucial.
Most salary workers use their bank accounts as conduits for their earnings. It’s possible to treat a business account like this, raiding it of all the income that comes in.
Managing money is also another challenge for ‘wannabe’ business owner. If your money mindset is conditioned for small amounts of money, that you are already mismanaging, it will be a challenge to manage the huge inflows.
Not spending money on doodads but assets is a principle that should be applied at a personal level and business.
There is a tendency for people to get excited when they get windfalls that are splashed on liabilities as opposed to assets.
If you have this kind of attitude towards money, once your client pays huge amounts of money, it’s possible to close business that day to go for a spending spree.
However, profits or earning should either be re-invested or used to acquire other income generating assets as opposed to shopping for new cars.
Another common issue that is ignored is the growth period of a young business where it’s not bringing in money. Ideally, you should have some cash reserves that can take care of expenses during a period when business is in its infancy.
Habits like putting your finances on record will be useful in running your business. If consider taking note of your expenses, income and keeping receipts a bother then book keeping will be cumbersome.
Ultimately, achieving financial stability can be achieved through prudent management of your finances.
The writer works with Bank of Uganda
Topic of the week:When your finances are always in the red, you are more likely to fall victim of scams that promise quick returns. Keep in mind that clean money comes with hard work.
Have you been dreaming about starting business as a means to multiply your sources of income? If you have been nursing such a dream, it’s also time to take a harder look at how you manage your personal finances.
The way you manage your finances eventually impacts on your business or investments. A lot of people look towards starting a side business as a solution to their bad money habits. While a side business can be a useful source of extra income, it cant thrive unless you drop the bad money habits.
One of the key tenets of running a successful side business is ability to increase revenue while at the same time lower costs. Just like in business, increasing costs through lavish spending that surpasses your available income will result in poor financial health.
Before you take on this venture, it’s important to learn rules of the game in both business and personal finance management.
Related to that, you have to apply the basics of personal finance management like financial forecasts, tracking every shilling, saving a considerable percentage of your income, living within your means among other things.
Unless you get this right, your personal issues will not only divert your attention from running your business, but they will eventually force you to raid your business funds to take care of personal needs. Eventually your business will suffer because it will lack working capital.
In addition to that, this can be made worse if you suffer from a ‘copycat’ syndrome. This relates to starting your business because so many people are running the same.
With this kind of attitude, it will be impossible to ascertain what works and what doesn’t.
Most people running side businesses consider employing unskilled friends or relatives as they concentrate on day jobs.
Most of the employees lack drive and vision for the business and because you are not willing to delegate most of the authority, they have to wait for you to be present for some decisions to be made which impacts on the business.
Given that your business has divided attention and lacks systems that divorce it from the owner, it suffers and may eventually collapse.
Opening a separate account for your business is crucial.
Most salary workers use their bank accounts as conduits for their earnings. It’s possible to treat a business account like this, raiding it of all the income that comes in.
Managing money is also another challenge for ‘wannabe’ business owner. If your money mindset is conditioned for small amounts of money, that you are already mismanaging, it will be a challenge to manage the huge inflows.
Not spending money on doodads but assets is a principle that should be applied at a personal level and business.
There is a tendency for people to get excited when they get windfalls that are splashed on liabilities as opposed to assets.
If you have this kind of attitude towards money, once your client pays huge amounts of money, it’s possible to close business that day to go for a spending spree.
However, profits or earning should either be re-invested or used to acquire other income generating assets as opposed to shopping for new cars.
Another common issue that is ignored is the growth period of a young business where it’s not bringing in money. Ideally, you should have some cash reserves that can take care of expenses during a period when business is in its infancy.
Habits like putting your finances on record will be useful in running your business. If consider taking note of your expenses, income and keeping receipts a bother then book keeping will be cumbersome.
Ultimately, achieving financial stability can be achieved through prudent management of your finances.
The writer works with Bank of Uganda