Personal Finance for Microbusinesses

With the way financing and revenue will work for Microbusinesses, it is probably best to buy what you need well ahead of time–actually as soon as you have the money. Tangible products in your hand are going to bring you more financial security than money in the bank. Try to have everything you need for the next 1-3 years at any given time. There are two ways to do this. One is to come up with a quarterly schedule for inventory purchases where you fill up on different assigned categories (for the next 12 months) on one specified day of each quarter. This will spread the purchases out. The other is to take the money once a year, and divide it into 12 for the next 12 months. Figure out how much more money you need for your basic needs and set that as a monthly income goal. Then decide how much money you need each month for indulgences like vacations, gourmet food, and gifts, and set that as a second income goal for each month. Go ahead and spend what you have, and then once you have reached the basic needs income goal, the rest of the money you earn each month is for you to use to indulge yourself. If you earn past what you need for that, you can put the extra money away. Finally, when you have the option, you can make an investment and pay for up to 3 years of a business service ahead of time–for example, with domain name purchases.

Because bank accounts are FDIC insured, local banks will probably give you better customer service and more help in business emergencies. Also they will probably have a better relationship with a local government who will push the Federal government if multiple bank customers are affected by something. However, there is a quiet etiquette about the maximum amount of money that you can keep in local banks, and whether or not you can keep money in another community’s bank, which you will have to look into.

Think about these:

  • Grooming Supplies, Cleaning Supplies, Paper Products
  • Office Supplies, Stationery
  • Grocery gift cards. Set a monthly food budget and then buy enough cards for a year at that budget.
  • Fuel cards. Estimate your monthly gas expenses and buy enough cards for a year at that level.
  • Utilities. Ask if you can pay ahead or if gift cards are available. Buy enough for a year.
  • Home medical supplies like bandages, ointments, and electric toothbrush heads.
  • Gift cards for gifts, or pre-paid credit cards for you to use when you decide what gift you are buying. Meal gift cards for the meals where you will be giving people their gifts, or pre-paid credit cards for that.
  • Clothing. Classic quality clothes that won’t go out of style should be considered a business inventory expense and kept properly in a clean inventory closet. Also stock up on day-to-day clothes. Don’t forget your solids, basics, undergarments, and accessories.
  • Sheets, towels, linens, cooking supplies, pantry ingredients, dinnerware and silverware.
  • Electronics should usually be bought as and when needed, but you can decide on stocking up on things like ink, and USB drives. Always have a backup computer with a security program installed. When you buy a new computer, the current computer becomes the backup, so just remember to renew the security on it.

You should probably have a PayPal account tied to a business email and a credit card for online purchases only, or to a business credit card. When you want to go on a vacation, buy everything you possibly can ahead of time and in full. You should have one credit card for in-person purchases like clothes, entertainment, and extra vacation purchases, that is separate from the card you use online, and your business credit card. Put car repairs and maintenance on your in-person credit card, but try to pick out cars that you can buy in full with cash–write a check for them. Technology expenses need to go on the business credit card or the online purchases credit card. Housing is a complicated issue–the rule of thumb is that owning something is always the best, and debt, rent, and mortgage payments are to be avoided. Medical and Legal expenses vary from country to country, having a family doctor and lawyer in place before you need them is key–and quality health insurance is very useful, as is quality liability insurance.

If you want to budget the things that are listed above as going on credit cards, you can use pre-paid credit cards to make sure you have the money when needed. You will need multiple safes in your home, and at least one needs to be hidden.

It is important that microbusiness owners work together so that credit scores for anyone who has an EIN number (the number you get before you consider hiring employees or put having employees into your business plan) are irrelevant, because you as a microbusiness owner will always bear the burden in your credit score when any level of government screws up, and your credit score will ALWAYS be lower than it should be. Financing for microbusiness owners should require your EIN number, current assets and holdings, current debt amounts, and your past tax records–NOT your credit score.

I will be following this strategy myself when I have the money. I hope this helps.

Lilly Lekhan, Poet and Founder of The Sweetest Art List

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