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Starting a new business is never easy. One of the challenges is managing the finances – ensuring financial stability and investing in the growth of the company.

Establishing sound and prudent financial management is critical to any business. For small business owners, however, this can prove to be the difference between success and decline.

One of the most important challenges for entrepreneurs is that they are not financial experts. This means that they must invest to ensure that their “money management” finds the right balance between investing and saving.

For those faced with this tradeoff in practice, here are five financial tips to keep in mind:

Separate personal resources

Rule number one for owning a business; Never mix your business funds with your personal ones. Mixing the two together can mean losing insight into the company’s financial earnings and cash flow, and overvaluing (or underestimating) personal wealth.

If the company is in debt to begin with, its debt can become your debt. Mixing business with personal money makes it more difficult to reconcile financial records and thus know what the split between personal and business wealth is. So avoid the mistake of combining both accounts and use a separate bank account specifically for your business.

Live frugally

For the first few months or years that your business is still in its start-up phase, make sure your costs stay low. Even if you have personal loans to support all of your business purchases, new costs can always arise. So it is best to keep investing money in your business and not invest in yourself until you are the successful entrepreneur you have dreamed of.

Save gifts and rewards when you hit a milestone or goal. This way you can save without spending too much.

repaying debts; to repay debts

Debt is never good for a company. So for any debt, make sure you have a viable repayment plan in place to get the debt out of the way as quickly as possible. It is recommended that you focus on debt agreements with the highest interest rates first and then pursue debt agreements with more favorable terms.

Maintain a cash reserve

A cash reserve can be like a savings account for your company that can help you in emergencies when there is no other way out. This can be critical for businesses because you never know when an emergency will arise. When you have invested all of your earnings, financial problems can arise. Set aside some of your profit to cover uncertain or challenging times.

Always budgeted

No company or person with limited resources can function without a feasible budget. Budgeting makes everything productive and helps you stay focused. You will be less hectic as you conduct your business and expenses as you will know exactly how much money is being spent on which items. Have a working budget for all expenses and calculate profits for the company and yourself.