Pat Mokgatle | 31 January 2025
Pat Mokgatle is a chartered accountant who is head of entrepreneurial business at audit, tax and advisory firm BDO. He also runs a start-up, Decorum Stylists, which provides grooming, tailored suits, accessories and image consulting.
Starting your own business is an exhilarating journey filled with opportunities and challenges. One of the most critical aspects of this journey is managing your finances effectively.
Whether you are at the inception of your entrepreneurial venture or contemplating the leap, understanding both personal financial issues and small business finance intricacies is paramount to your success.
Maintaining a personal budget
Before diving into the complexities of running a business, it's crucial to have a solid 
personal financial foundation. Creating and maintaining a personal budget allows you to manage your expenses, savings and investments effectively. A well-structured budget helps ensure that you have a financial cushion to fall back on, which is particularly important during the early stages of your business when income might be uncertain.
An emergency fund is a financial safety net that can cover unexpected expenses or financial shortfalls. For entrepreneurs, having an emergency fund is even more critical, as business revenues can be unpredictable. Aim to save at least three to six months' worth of living expenses to provide a buffer against unforeseen financial challenges.
High levels of personal debt can strain your finances and impact your ability to invest in your business. It's advisable to pay down high-interest debts, such as credit card balances, before you start your business. This not only improves your credit score but also frees up more resources for your entrepreneurial endeavours.
One of the most significant challenges for new entrepreneurs is securing the initial capital required to start the business. Consider various funding options, such as personal savings, loans, investor funding or crowdfunding. Each option has its pros and cons, and it's essential to choose the one that aligns with your business model and growth expectations.
A comprehensive business plan is a roadmap for your business's success. It should include detailed financial projections, such as cashflow statements, profit and loss forecasts and break-even analysis. These documents not only help you plan your finances but also attract potential investors and lenders by demonstrating the viability and profitability of your business.
Accurate tracking of business expenses and revenue is crucial for financial management. Utilize accounting software or hire a professional accountant to keep your financial records organised and up-to-date. Regularly reviewing these records helps you identify trends, manage costs and make informed financial decisions.
Understanding and complying with tax obligations is vital for small business owners. This includes registering for the appropriate taxes, such as income tax, VAT and payroll tax, and keeping accurate records of all transactions. Consulting with a tax professional can help you navigate complex tax regulations and take advantage of available deductions and credits.
Effective cashflow management ensures that your business has enough liquidity to meet its obligations and invest in growth opportunities. Monitor your cash flow regularly and implement strategies to improve it, such as optimising inventory levels, negotiating better payment terms with suppliers and incentivising early payments from customers.
Mixing personal and business finances can lead to confusion, financial mismanagement and legal issues. Open separate bank accounts and credit cards for your business to ensure clear and accurate financial records. This separation also makes it easier to track business expenses for tax purposes and maintain a professional image.
As a business owner, it's important to pay yourself a reasonable salary that reflects your living expenses and business performance. This ensures that you can meet personal financial obligations without compromising your business’s financial health. Periodically review your salary and adjust it based on the business’s profitability and growth.
Navigating the financial landscape of entrepreneurship can be complex and overwhelming. Seeking advice from financial advisors, accountants or business mentors can provide valuable insights and guidance. These professionals can help you create a robust financial strategy, avoid common pitfalls and ensure long-term success.
Managing personal and small business finances is a critical component of entrepreneurial success. By understanding and addressing the financial challenges associated with starting and running a business, you can build a strong foundation for growth and stability.
Prioritise financial planning, seek professional advice, and remain adaptable to navigate the ever-evolving financial landscape.
With careful planning and effective management, you can meet your entrepreneurial goals and ensure a successful outcome for both yourself and your business.
How can I draw up a budget that works for me?
How do I set up an emergency fund?
What does credit cost?
How can I pay off my debt faster?
Where can I get funding to start a business?
How do I calculate how much money I need to start a business?
Why and how should I draw up a business plan?
How do I plan and manage my small business cash flow?
How can I manage financially on an irregular income?
