Women Entrepreneurship has been recognized as an important source of economic growth and as an effective method to achieve a democratic society based on women’s empowerment and gender equality values. It is imperative to provide jobs to more women to build an entrepreneurial society centered on gender equal opportunity. The main strength of women entrepreneurship is its transformative power over the economy and society as it brings job creation potential, new sectoral opportunities, innovation, creativity, and diversity to the economic arena. Women entrepreneurs should have a deep understanding of personal finance and business finance. A woman in all forms of business- whether sole proprietorship or a partnership should be aware of the fundamentals of financial planning.
As an entrepreneur, it is imperative that women separate their personal finance and allocate a separate fund to refinance their current business and finance their new business. By doing so, it will minimize the personal liabilities and not pass on to family members who are dependent on your business financially. Secondly, it helps you seek external funding as investors see your business as genuine, and credible.
As a woman entrepreneur, you should have a clear assessment of your business’s financial position, understand your net worth, savings and investment potential when deciding to invest into a new venture. Therefore, a detailed financial plan acts as a road map to take calculated decisions and enable women entrepreneurs to gain knowledge of the different sources available to fund businesses. Financial planning ensures cash flow into the business, helps improvise on strategy whenever required for prompt decision making for the growth of their business. A good finance plan will let a woman entrepreneur do much more with the resources in hand as it helps to prioritize their financial resources and utilize them to full potential. It also helps the women entrepreneurs to stay focused on their business and personal goals, and targets. It will also assure minimal risks and profitable returns on investment. Women entrepreneurs should know where the investment opportunities are available for operating the business.
Women need to have a complete understanding of their existing and required financial health and must plan it thoroughly as it will enable them to realize all business goals, gain knowledge about investment opportunities and their sources of funding, manage risks effectively, minimize debt, be ready to finance future growth and expansion plans with the returns earned. Therefore, women entrepreneurs should not shy away from taking expert advice from best financial advisors. Women entrepreneurs should break through the challenges underlying their entrepreneurial aspirations and become better managers of their finances. In order to achieve these, they need to start taking control of their finances, gain confidence in financial knowledge.
As a woman leader in the organization, you need to display full knowledge and understanding of your finances and tax planning. This reflects on your confident personality, it, therefore, bolsters your image in front of investors, and important stakeholders, it helps finance and tax employees make smarter financial decisions.
As entrepreneurs, it is imperative that women separate their personal finance and allocate a separate fund to refinance their current business and finance their new business.
Advantages of Financial Planning for Women Entrepreneurs
Below are the advantages of financial planning both on personal and business front for women entrepreneurs:
A woman entrepreneur should know every little detail of finance- the terms, its meaning and usage in practical business life. Terms like debit, credit, being cash ready, continuous cash flow into the business, tax planning. She needs to sit with the financial planner and learn it all. She needs to keep herself updated about new business avenues, newer sources of finance, etc.
Making a viable financial plan at the start of the organization will lay a strong foundation of the organisation, you are setting a precedent for your subordinates to follow and to inculcate a culture of savings and making conscious financial decisions, be it at home or at work. It lays foundation for a healthier and productive workplace.
Displays a confident image
When your investors and shareholders see you working on your finances and plan the future, it builds confidence in them that you are a pragmatic and smart leader who can be relied upon. This could get the investors on board; they not only want the trust factor but also the one who is prepared for difficult times in business.
Widen your net
A sound financial planning can help you generate enough wealth to plan expansion, and venture into newer business avenues. With the right financial plan in place, a businesswoman can open a new line of work, expand, or even get into a completely different line of business.
Goals and Strategy
The first step to a solid financial planning is to write down the goals one wants to achieve, the strategy one will deploy to achieve it and the timeline for it. This is important because it will save a lot of capital. A goal-oriented journal to segregate and delegate the work. Hiring the right finance professionals, setting realistic targets and their growth evaluation will be swift.
Financial planning will help assess the risks that will be mitigated while making an investment into a venture. Your appetite for risk will be known.
Focus on Return on Investment (ROI)
A sound financial plan will make sure you get the profits from the services you give to your customers. This will augur well for increased goodwill for your company.
Financial planning will help analyze expenditures monthly, quarterly where one can find out what went right and wrong and where. When it has gone wrong, it incurs unanticipated expenses. Analyzing it will help you find out ways not to repeat mishaps if occurred and increase the productivity of things that went right.
Have a backup plan for your business or your investments, in case things don’t go as planned. Diversifying portfolio, investing in multiple businesses are part of a contingency plan. Keep your personal finances independent, separate from business finances. This helps in keeping one’s personal liabilities on the down, while making the business seem more credible.
Due to multiple roles a woman entrepreneur embraces that of a daughter, mother, as household managers, a sound financial management is extremely important.
Planning your expenses for a given year, month, quarter and monitor if you have spent more than you originally planned. At the end of the month, make the necessary adjustments to optimize it, daily follow up will help you save money.
Save and Invest
Money too is volatile so you must focus on savings and investments. Aim to accumulate to invest, generate returns and earn more. You should be an active investor and above all to understand the chosen method. Saving and spending sensibly is a habit that is good for everybody. Women entrepreneurs often end up not focusing on their own finances, preferring to involve themselves completely in their craft.
Different accounts for different purposes
Money management is important in generating maximum wealth. One of the ways is to divide the money into specific purposes and relate each account to one area of your life- and use it only for that purpose. Each time you receive money, assign a percentage to each account.
Increase added value
The more value you generate, the higher the price that your client will be willing to pay for the product or service you provide. Investing in your business to grow and creating more capabilities is the best long-term strategy where you can add experience, training and continue to be updated.
Seek to protect your personal and business finance through insurance on your life and other assets that can adversely affect and impact your wealth. Create an emergency fund (equivalent to three to six times of your income) in order to face any possible problems faced relating to work, production or personal situations that may arise.
Plan for retirement
It is never too late or early to plan for retirement and make savings plans. One should make a perfect retirement plan that will yield higher results and manage costs.
Build and consolidate your credit history
Your credit history should be credible, clean enough for financial institutions to provide you a loan without mortgage. Pay your debts in time, in a systematic way. Clear all debts timely by making a debt management plan. Financial analysts feel having a clear focus on business and planning is essential for efficient personal finance management. It seems simple and even obvious but the truth is that women, due to social and cultural reasons, have less experience and practice with focusing on savings, defining goals and designing strategy.
They indicate that the first step is to make a diagnosis: How much is spent and on what, how much money comes in, how much is left over, if applicable, or in the worst-case scenario, how much is missing. The next step is to establish saving goals that should be used for: first, building an emergency fund, then to meet short- and medium-term objectives such as the purchase of a durable or semi-durable item, and finally, the long term objectives such as the purchase of a fixed asset. When we speak of savings, it is important to consider the idea of investing, since investing makes savings yield better returns.
Money too is volatile so you must focus on savings and investments. Aim to accumulate to invest, generate returns and earn more.
Financial Plan: Key Aspect in The Lives of Women Entrepreneurs
Money cuts through all aspects of women entrepreneurs’ lives: at a personal, employment, and even at a social level. Focusing on our personal finances means focusing on our lives. There is no overlap but rather integration, managing our accounts is not just another task but a key aspect to all that we do.
Women entrepreneurs need not be an expert, they only need to have a clear idea of their current finances, its situations, both at a personal and professional level, and then develop a plan from there. If decisions become a bit more complicated, whether regarding the business or investments, one can consult with a trustworthy and credible financial advisor with whom to build long-term relationships.
The government of India has come up with schemes that are designed specifically for women entrepreneurs. Various NGOs, state Small Industries Development Corporations and nationalized banks have initiated Entrepreneurship Development Programs. These provide guidance for women entrepreneurs to develop financial planning for both personal and business. Financial schemes like Prime Minister’s Rozgar Yojana provide benefits to women entrepreneurs in terms of concessions and incentives. Since banks are a major funding source for any entrepreneur, the Bharatiya Mahila Bank, with 45 branches, focuses on women entrepreneurship across the country. Loans are provided by this bank for various ventures by women entrepreneurs. Apart from domestic government assistance, there are also financial institutions like the World Bank that are coming up with specific schemes to benefit women entrepreneurs and increase the financial inclusiveness of women. The Women’s Finance Hub, launched in 2013, aims to further the financial access of women-owned businesses.