Financial Plan, 4 Important Things to Understand Before Beginning Your Business

Financial Plan, 4 Important Things to Do Before Beginning Your Business
Financial Plan
Entrepreneurship is on the rise within the last 5-10 years. One way that is widely used by many people to be able to seek additional income (or even primary income) is to do business. Unfortunately, our passion for business are often not backed up with good preparation, especially the mental preparation and personal finance.

Someone who is just starting a business should have to do financial planning for businesses that he will run. The purpose of this plan is to minimize the level of risk that will happen to the finances if something we did not expect actually happened. Do not let what we are doing instead become a burden and a problem for our lives in the future.

So, what we need to do before we start doing business? we should do a financial check-up first. Here are the things that must be considered before we start a business:

Preparation Emergency Fund


Setting up an emergency fund is very important. The function of the emergency fund is a reserve fund that can be taken for any future if we're in an emergency. For example, personal/family emergency fund (illness, death, etc). For those who are going to start a business should put these funds separate from office/business emergency fund.

Meanwhile, an office/business emergency fund is usually used for several things. For example, for supporting the operational costs or the purchase of a staple when it turned out the payment of unpaid bills. Many new companies are not taking full account operating costs, this often happens, so that when the payment terms backwards, the company became overwhelmed and the problem appears on the cash flow.

Emergency fund can also be used in case when bad things befall the company, and it requires compensation and penalty fees. The amount of the emergency fund is different, according to the conditions of each individual or family. As for the placement of the emergency fund should be placed on a financial product that is easy to access, safe and provides comfort (low risk).

Avoid Debt, Especially That Is Wasteful (Unproductive)


Debt is a matter that is not recommended for those of you who are just starting a business, especially a wasteful (unproductive) debt. However, if you already have a debt, you should pay off first. Great interest rate will be charged to you by the bank, and it will be a very annoying thing for your finances.

In addition, an unstable business you run will certainly be very burdensome if you have to pay off the debt. If you wish to borrow from the Bank, should be done when you run a business that has been running for at least two years, due to financial business begin to run stably.

Insurance, Make Sure You Have It


Insurance is very important to protect your economic value. The first must-have is health insurance. It becomes very important and urgent for those who decide to get out of your routine job (as employee) and decided to become an entrepreneur. Because when you were working as an employee, you would still get the benefit/insurance from your office, whereas when it becomes entrepreneur then you are not protected. you are protecting yourself and the company you run.

For those who are married and have children, you should have life insurance, so that if there is a risk such as death that could happen at any time, the bereaved family still survive with the money issued by the insurance company, including continuing the business that has been built.

The calculation of the sum insured is very important, therefore do a calculation of how much money is needed for your family, calculate carefully, so that the amount you pay every year is in accordance, not less or more. And make sure the insurance you have is pure, not mixed with the investment so that the sum insured is given maximally.

Separate and Keep Positive Cash Flow


Still regarding the emergency fund, one of the biggest problems in a business that often occurs is setting the cash flow that is not good. Do not let your finances imbalances occur. Plan well in order 'expenditure' smaller than 'income'.

For personal finances, these surplus funds can use for the purposes of investment and saving, including investing it into your business. As for businesses, the excess of cash flow can be used to expand the business or to provide bonuses for employees. Just like personal finance for businesses, you should do a record every time you make a transaction. This needs to be done to guard against the unknown leakage.

The most important thing in this case is always split between personal (family) cash flow with office (business) one. It’s often be found , that the personal finance is mixed with the business one, and this led venture capital lost in personal finance. The result is no venture capital that can be rotated. Therefore, discipline is required in financial separation. The easiest way is to use separate bank accounts (personal bank account and business bank account).

Have a double income from “work as an employee” and “work as an entrepreneur” is not prohibited and occurs naturally in contemporary times. The need to live with the family as well as a variety of other / business dependents will encourage us to pursue both of them. We need a good financial planning so that we can minimize and solve the problems. Just do up to you, working as an employee and as an entrepreneur. And remember, you must have good financial planning. (TDA Surabaya)

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