What are the Common Financial Challenges Faced by Entrepreneurs?

Entrepreneurship looks all shiny from the outside but there some financial challenges that entrepreneurs have to deal with throughout their journey.

Being your own boss, hustling daily, doing things your way, high passion, and high spirit - all sound amazing.

It is not so simple and easy, though. Entrepreneurship demands everything - money, time, life - in excess. Yes, it sometimes leads to burnout.

An entrepreneur is struggling daily. The only thing that keeps them going is burning passion. 

Some to-be-managed daily issues for entrepreneurs are funding, operation, personnel, inner management, clients, etc. and so much more.

Plus, the wealth of the founder naturally depends on the success of the business, which, in case of the absence of proper setup, ends up being a tangled web.  

In case you are about to start your own business, we are here to ease out some of the top challenges you might be facing as an entrepreneur. Check out the points below! 

Common challenges faced by entrepreneurs: 
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Fund shortages / low cash flows
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Cash flows are simply the “lifeblood” of your business.

If there persists a lack of consistent cash flows, even the regular functions of the company would come to a halt.

From payrolls, rents, and utilities to raw materials and inventory, cash flows are the prime requirement. 

Your business would survive for some time in the absence of reasonable profits, but it is the cash flow that ultimately keeps the door open.

As you begin your entrepreneurship journey, in order to prevent cash flow shortages, you can try to tighten up the cash flow cycle.

Cash flow cycle is nothing but how the money flows inside your business - from paying off for raw materials, salaries, etc. to collecting receipts.

This can be done by receiving your receivables faster and stretching out your payables further, or the best is, both together. 
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Lack of available capital 
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As you enter the business world, borrowing money will become a frequent task, especially when your cash flows are down.

Be it for raw materials or just expansionary opportunities, you will need to borrow money to bridge the cash flow gaps.

However, what you can do is not wait for the need to arise. Instead, when you see the potential, then & and set a plan for funding/financing your upcoming projects.

To access capital beforehand, you can try out the following options: 
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• If you have a small business with enormous potential, well, venture funding would do the deed for you. 
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• If you want to give up equities in exchange for cash, then private equities will be the best for you. 
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• You can also look for funding options from various banks. Or any new government initiative can be useful too. For example, the Startup India scheme. 
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• Your personal savings can be used, too. 
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Current market conditions 
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If the economy, on a broader level, is suffering or gaining, this will definitely affect your business, too.

The point is that these economic business cycles are inevitable.

What you have to do is manage your business in a way that is always prepared to handle the downturns and take advantage of the upturns. 

Maintaining a strong cash flow, keeping financing options always ready, etc. will ease out the downturns and take advantage of the available credit upturn.

You must encourage your business to take on expansionary activities. 
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Management of business vs. personal finances 
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So, this is for new entrepreneurs: Always keep your business finances and your personal finances separate. It is never a good idea to mix both. 

In short, always keep a separate bank account for your business in order to track the cash flows properly.

If you do not do so, it can create problems for your business.

One example of this is that this mix can be considered a red flag not just by internal auditors but by government auditors, too.

So yes, do apply for a business checking account and business credit card. This will really help you distinguish the taxes during the tax season.

Lastly, make sure to pay yourself a set amount salary (will make it easier to track personal finances) versus just paying yourself an ad hoc amount based on profits. 
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Tax compliance & auditing 
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Now that you know that cash management is already challenging, make sure you do not worsen it further.

Look if you're overpaying or underpaying your taxes - both are harmful for your business. 

It is always good to keep an accountant in your staff to maintain these records.

Additionally, to save on taxes and plan for such opportunities, do regularly meet with your financial advisor along with the accountant. 

Conclusion 

Handling a business is not the job of a faint heart - you need strong skills to run that.

When establishing your own business, make sure to learn from the best, explore the field as much as you can, maintain good finances, and if needed, take expert help.

The most difficult part would be the management of cash flows, and this should not be taken lightly. From receiving to dispersing, make sure that the process is not leaking anywhere. 

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