Entrepreneurs are a deeply passionate breed. That\u2019s why they willingly put in long hours and make personal sacrifices to create products and solutions they are proud to sell.<\/p>\n\n\n\n
However, part of running a successful business involves managing your business finances well. This can be very different from managing your personal finances, and new and\/or young entrepreneurs will unlikely have much experience in this area. <\/p>\n\n\n\n
Regardless, you may still think it\u2019s wise to simply bootstrap, figure your way out and save on this cost. Being a first-time entrepreneurs and starting before our 30s, we\u2019ll be the first to admit that it\u2019s easier said than done. Even though we thought we were quite financially aware, we can\u2019t claim to have gotten everything right at the start. <\/p>\n\n\n\n
To help other first-time entrepreneurs make better decisions with their company finances, we recently spoke to Tan Wei, the ex-Chief Financial Officer (CFO) of an SGX-listed company. He currently runs a consultancy firm providing business and financial advisory to companies going for an IPO, undertaking M&As and\/or restructuring.<\/p>\n\n\n\n
In our discussion, Tan Wei shared four common mistakes that he sees many new business owners making, and how these seemingly innocent oversight may come back to bite them later on.<\/p>\n\n\n\n
Read Also: <\/em><\/strong>4 Bad Reasons For Wanting To Be An Entrepreneur And Start Your Own Company<\/em><\/strong><\/a><\/p>\n\n\n\n New entrepreneurs tend to mix their personal and business expenditure, as well as assets. Tan Wei says this is a common mistake as first-time entrepreneurs may not be able to distinguish their company as a separate entity from themselves.<\/p>\n\n\n\n It\u2019s easy to see why this happens. In the initial phase of business building, many founders bankroll expenses and investments needed by their start-ups out of their own pockets. After the company starts generating revenue and standing on its own, they may fail to separate their personal and business finances.<\/p>\n\n\n\n Not separating our personal and business finances creates more blindsides and prevent us from accessing relevant information on the company\u2019s financial standing and performance. This can lead to entrepreneurs making sub-optimal business decisions. <\/p>\n\n\n\n Similarly, we paid for the initial expenses to set up and run DollarsAndSense out of our own pockets at the start. However, when we decided to turn it into a business, opening a business banking account was a logical step as we had more than one shareholder. This meant that the company\u2019s funds were kept separately and business transactions were done through our business account.<\/p>\n\n\n\n A separate business bank account also provides more functions than what is typically provided on personal bank accounts. For example, a business bank account will give you access to business payment solutions, including PayNow Corporate or PayPal. <\/p>\n\n\n\n Furthermore, you will also be able to tap on digital solutions provided by the business bank accounts you choose. This can include e-invoicing and cash flow management.<\/p>\n\n\n\n Having a business bank account will also allow you to manage other business functions, such as applying for trade financing, and connect you with other digital tools in a single dashboard, including Expensify, MailChimp, Office 365 and more. <\/p>\n\n\n\n For this benefit, there are typically more and heftier fees that you incur for business bank accounts compared to personal bank accounts.<\/p>\n\n\n\n Read Also: <\/em><\/strong>[2021 Edition] 4 Best Business Bank Accounts In Singapore For New Business Owners<\/em><\/strong><\/a><\/p>\n\n\n\n Not investing early in software is one common way that new businesses try to save on costs. However, Tan Wei points out that many companies eventually spend more time and money over the long-term. Business owners are often overstretched as it is, and you could also use the time saved to grow the business more productively, or simply spend it with your family.<\/p>\n\n\n\n Relying on \u201cold school\u201d style bookkeeping with software like Excel may result in entrepreneurs draining a disproportionate amount of time on manual bookkeeping and incurring greater manpower cost in the long-run. You would also lack the financial data needed to make objective and quick business decisions \u2013 which software solutions can provide in real-time.<\/p>\n\n\n\n Payroll is another function that many business owners wish they could alleviate each and every month. Paying salaries and making CPF contributions can be a chore, and depending on the size of your company, take a significant amount of time. <\/p>\n\n\n\n For a start, entrepreneurs can rely on your business bank account for free solutions. For example, OCBC business bank accounts enable us to visualise our cash flow position each month and even in advance with accounts receivables and account payables. This eliminates the need for manual calculations or waiting till we do our monthly bookkeeping. We can also leverage on our business bank account for basic payroll and even regular payments to vendors with transaction templates.<\/p>\n\n\n\n More advanced (and costly) solutions such as enterprise resource planning (ERP) and robotic process automation (RPA) may be delayed until they are absolutely required.<\/p>\n\n\n\n Ultimately, not relying on a suitable digital solution will also lead to poor record-keeping, giving rise to a series of administrative backlog as well.<\/p>\n\n\n\n Read Also: <\/em><\/strong>8 Things That Employers Are Legally Allowed To Deduct From Workers\u2019 Salary (According To The Employment Act)<\/em><\/strong><\/a><\/p>\n\n\n\n This is something we could relate to. In bootstrapping a startup, many first-time entrepreneurs think that they would \u201cfigure it out later\u201d \u2013 after the business becomes more successful.<\/p>\n\n\n\n Tan Wei points out that new business owners usually observe how competitors are running their business and would just model their business after it. However, you may not have a full picture of what is going on behind the scenes or appreciate the structure that the other company has established. <\/p>\n\n\n\n This is another cost new business owners can save on. However as time goes by, you will only spend more and more time on bookkeeping. Business owners could have outsourced to a professional hire or financial consultancy firm, while focusing their time productively on growing the business.<\/p>\n\n\n\n Apart from time, having an experienced accountant or financial adviser may also save the startup money by providing the right financial information to maximise profitability, comply with government regulations and forecast future cashflow position. <\/p>\n\n\n\n Tan Wei has also seen corrective actions taken by businesses to be very time-consuming and costly. He believes that this is a crucial step in laying a strong foundation for any business. <\/p>\n\n\n\n#1 Not Separating Personal And Business Finances<\/strong><\/h3>\n\n\n\n
#2 Not Investing In Software<\/strong><\/h3>\n\n\n\n
#3 Not Seeking Professional Advice And Guidance<\/strong><\/h3>\n\n\n\n