Deciding to partner with a relative, friend, or colleague to create your own business is a lovely idea, but it also comes with great responsibilities. One of these is learning how to manage your finances together with your business partner. Handling your money as a couple is a different matter compared to when you’re just managing your personal finances.
Financial planning is necessary because problems with money can seriously cause conflict among partners and can ruin a relationship. So, it is better for all partners to carefully talk about their finances, especially if you are planning to start your own partnership together.
As you try to figure out the best way to manage your finances in a partnership or corporation, below are some tips that can guide you along the way:
1. Be transparent with everyone about finance-related matters
As much as possible, always be honest with each other about your financial status, including your debt, savings, income, credit standing, money goals and other finance-related matters. To run these smoothly, TempCFO.com Accounting could assist you in dealing with the financial side. Discuss also how you want to achieve your financial goals for your brand’s future. Each of you may have different opinions about this, so settle your disagreements and come up with a plan that you both approve of. If you think that you are not ready to share these things with your partners, then better reconsider if you really want to handle this enterprise alone or with partners. Remember that your financial decisions are not anymore only for yourself, but for the brand that you will build. Keeping an open line of communication about these things will help strengthen your relationship with business partners.
2. Try as much as you can to lessen liabilities
Since you will now be managing the business together, you have to risk finances together, too. It is important to be clear on how you will share responsibilities, including finances. Before anything else, make sure to list down all asset needs that matches with your current financial situation. That also includes the rent or wherever you want to put your up your office. Then, decide how much each of you should pay and who will be in-charge of settling the payment.
Find time to reassess the setup you’ve made whenever there are changes in your source of income. It is also best to have a lawyer put this partnership in the paper, so if things go wrong, you have something to back you up. Being clear about your financial responsibilities will save you from misunderstandings and unnecessary fights.
3. Be clear on how to divide your expenses
Building the brand together means that you must settle how to pay for the various expenses that you will have. Who will pay for the utilities? How much should be your share? How about the emergency expenses? When you start growing and you move from one employee to five, things will start to get more serious, which emphasizes how important it is to have a plan. One option that you may try is to pool your funds for shared expenses together in a joint bank account. But you need to discuss how much each of you will have to chip in. It may be divided equally, or it may also depend on how much share each of you has in the business.
Aside from the daily expenses, prepare also for the future. Set a goal as partners on how you want your finances to look like five years from now, then ten years and so on. Identify the steps that you should take to make these goals come to life. Opening a savings account may help. You may opt to save on your personal bank accounts, but make sure that you are both updated and on the right track of the progress of your financial goals.
4. Be responsible for your debt
When it comes to the issue of personal debts—like your long overdue credit card balance or even your student loans in college—it is better to pay them on your own without the business involved. Practically speaking, while it is so easy to combine your debts, it will be tough to de-mingle it in case a problem arises in the future. That is why it is highly advised for business partners to be credited independently and not to drag your partners into your own financial obligations. A business account is a business account: nothing more and nothing less.
5. Make a written statement of your financial agreements
Finally, it is best to put in a paper all your financial agreements as partners. Before deciding to build this brand together, you should enter into a legal agreement with your partners which outlines in detail who owns the properties, how your assets will be shared, and other relevant financial matters. Doing this will not devalue your brand. It is only necessary to avoid any difficulties in the future. It is like getting an insurance policy: no one likes to put themselves in danger, but they still get insurance just in case.
These are some of the fool-proof strategies that can help you manage your business’ finances, especially if you have partners involved. It may be challenging to deal with partners, especially if you are not used to working with others. But if things go well, you will see that, indeed, “two heads are better than one.”