How does the entrepreneur keep track of the business finances?

2 Monitor your key financial metrics For entrepreneurs, these metrics include revenue, expenses, profit, cash flow, and return on investment (ROI). Accounting software, spreadsheets, or dashboards can be used to record and analyze these metrics regularly .

How to financially support yourself while starting a business?

Self-funding can come in the form of turning to family and friends for capital, using your savings accounts, or even tapping into your 401(k) . With self-funding, you retain complete control over the business, but you also take on all the risk yourself.

How do you manage your finances daily?

Check your bank balance at a regular, set time so you know what you're spending your money on and how much you have left. Build money tasks into your daily or weekly routine . You could allocate a set amount of regular time to think about any tasks you need to do around money, for example paying bills.

What are the 5 basics of personal finance?

There's plenty to learn about personal financial topics, but breaking them down can help simplify things. To start expanding your financial literacy, consider these five areas: budgeting, building and improving credit, saving, borrowing and repaying debt, and investing .

What is the most important step in controlling your money?

Determine Your Budget Creating a budgeting plan is an essential first step in finding financial success. You can start by determining how much you make each month and how much you spend in each category.

How do entrepreneurs manage their finances?

Regularly monitor your cash flow to ensure you have enough to cover expenses and invest in growth . 2. Creating and Managing a Budget Develop a realistic budget that outlines your expected income and expenses. Stick to your budget to control spending and ensure your business remains financially healthy.

How much should I pay myself from my business?

If your business is established and profitable, pay yourself a regular salary equal to a percentage of your average monthly profit . Don't set your monthly salary to an amount that may stress your company's finances at any point.

How do businesses keep track of their finances?

Tracking business expenses involves taking a few steps, ranging from opening a separate account for your business transactions to integrating your accounting software with financial institutions and then regularly filing your receipts and reviewing the records from time to time.

5 Steps to Easily Manage Your Finances as a Digital Entrepreneur (2024)

Becoming a digital entrepreneur is an excellent business opportunity in the current market but managing your finances as an entrepreneur may not be easy.

Digital commerce can be much simpler to establish, manage, and scale than a brick-and-mortar business.

Without the costs and complications that come along with brick-and-mortar shops, inventory, and office space, you’ve found a way to create a lucrative opportunity, while avoiding many of the challenges other businesses face. Not to mention, you dictate your hours and truly get to be your own boss.

Investing in an online business is a smart move—according to Nasdaq, studies show that by the year 2040, ecommerce will account for nearly 95% of purchases.

However, it’s anything but easy. You’re still responsible for running a full-blown business after all.

And, like all business endeavors, there is a lot of financial risk involved. Not only that, but smart financial decisions are the key to making your digital business successful and achieving the growth you desire.

Whether you write your own ebooks, develop apps, provide online courses, or build websites, this guide to managing finances as a digital entrepreneur is for you.

From common mistakes for digital entrepreneurs to best practices for business financial management, these 5 tips can help you make sound fiscal decisions for your business.

Table of Contents

1. Use Accounting Software

One of the most time confusing and complex aspects of managing your digital business is financial management.

If you don’t have a background in finance, figuring out standard bookkeeping and accounting practices like how to categorize transactions, balance your books, and generate financial statements can be frustrating and time-consuming.

2. Carefully track all expenditures

Of course, there are inevitable expenses that come with running any kind of business, even a digital one.

However, it’s important to have a thorough understanding of how much money you’re investing in running your business, to ensure you’re not putting yourself in the red.

For example, if you run a blog, there are certain costs like web hosting that are fixed, while others like investing in products to review are variable. You can adjust how much you’re spending on products in the beginning, if you find that you’re overspending compared to how much you’re earning.

Keeping close track of your expenditures is important in order to:

Determine whether your business is profitable
Get a clear view of your monthly cash flow
Set proper pricing for your digital products and services
Create a realistic budget for your business

As a digital entrepreneur, you are also the one responsible for making sure your business taxes get paid in full and on time. While taxes are an unpleasant part of running a business, there are opportunities to lessen that burden like deductions and credits.

Check out this list from Community Tax of common deductible business expenses to give you a starting point for what you can write off.

3. Keep Business and Personal Expenses Separate

As a digital entrepreneur, it can be tempting to keep the same bank account, especially when you first start out. However, it’s essential that you open a business bank account and keep business-related income and expenses separate.

4. Automate Invoicing

While a lot of digital businesses require payment upfront before getting access to the content or service—enrolling in a class, downloading software, etc.—that’s not the case for all digital services.

For example, services such as web development, graphic design, content writing, and so on, are usually not paid for upfront. Again, you can use this software to automate your invoices.

This is because they often require back and forth, revisions, and other aspects of workflow that complicate pricing and the client’s willingness to pay. If this is the case for your business, you probably give the client a quote upfront that you agree on but don’t send the invoice until the project is delivered and finalized.

This process makes sense, but the problem is that invoices often go unpaid. That’s why it’s essential you use proper contracts with clients.

In fact, in the U.S., about 11% of invoices are paid late to small-and-medium-sized enterprises.

When this happens, it not only requires your time and attention to follow up (often repeatedly), but it interferes with your cash flow—and in more severe cases, the client may avoid payment until you forget and you never even get paid for your work.

To help avoid this common conundrum, you can automate invoicing. This way the invoice is sent directly to them, reminders can be sent based on your settings, and when they do finally pay the invoice, it will be processed immediately.

5. Set Realistic and Measurable Financial Goals

As an entrepreneur, it’s likely you have big goals for your business. Of course, growth is always at the forefront of your mind, but achieving it isn’t as easy as pouring a bunch of money into your business and hoping for the best.

To grow your business in a way that’s manageable and profitable, it’s important to break the big picture down into smaller parts so you can create action plans and make progress towards your business goals. Some examples of effective goal setting include:

Earn $X in sales each month
Increase sales by $X in the second quarter
Capture X leads per week
Bring on X new clients per month
Increase revenue by X% this year

Once you have your goals laid out, come up with a plan to make those numbers a reality. This could include increasing your marketing efforts to increase leads, focusing on upselling current clients, expanding your service offering, etc.

Final Thoughts – Experience the Advantages of Smart Financial Management

With these tips in mind, you can manage your business finances much better.

Don’t fret if you haven’t been doing these things, running a digital business is accompanied by a huge learning curve. However, by incorporating these practices now, you can right the ship and set yourself up for success in the long term.

Keep in mind that every business—and every entrepreneur—is different, so don’t force practices that don’t work for your management model.

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Guest writer – Alexis Maness

Alexis Maness has a Bachelor of Science in Integrated Marketing Communications and is a contributing editor for 365businesstips.com. As a professional content writer, she has over five years of experience and is a contributing writer for several San Diego magazines. Alexis specializes in topics related to business, marketing, finance, and hospitality and tourism.

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