Finance is the life blood of any successful business, as no business can run without finance. Almost everything needed in building a fashion business costs money, and mismanaging finance can be detrimental to the growth of the business.
Many young fashion entrepreneurs are yet to master the art of separating company finance from personal finance which has led to a lot of problems in their business.
This week we spoke with Ms. Olajumoke Tawose, founder of Gracies Atelier and Ms. Omowunmi Sowunmi of Owunmiclothings on separating company finances from personal finances in growing a fashion business.
Her brand is described as a raring fashion brand because they are enthusiastic and ready to grow. They are always moving forward, learning new things, taking new risks and looking for opportunities to be better each day.
For her, company finance is income and expenditure based purely on doing business as a brand while personal finance is her money i.e. money that she is solely responsible for.
Ms. Omowunmi Sowunmi is the founder of Owunmiclothings. Owunmiclothing is a female bespoke fashion brand that caters to occasion outfits, most especially bridal. The brand recently started a ready-to-wear arm called Owunmichic.
Owunmichic is a ready-to-wear urban chic brand for women who love to show off their feminine profile. It does this by infusing elasticity through smocking using non-stretcy locally made fabrics to highlight the beautiful curves of the female body.
Owunmiclothings was birthed in February, 2016 after Omowumi got tired of not receiving responses from big fashion brands she tried to intern with after putting her pharmacy career on hold. Omowunmi, who started fashion design in her third year in university and perfected it after her university, took to fashion designing out of her frustration over getting disappointed by tailors.
To her, company finance is money that comes into the business in form of capital, grant, loan, transactions with a client and profit while personal finance is her money gotten from salary paid from the business, gifts or other sources of income.
Accoding to her, company finance is the money that is used to run the business to make it bigger and better.
“Every business needs a cash inflow for sustainability.” – Omowunmi Sowunmi.
How to Keep Track of Company Finances
Though unpleasant work for most people, bookkeeping is an important aspect of running a fashion brand. Our designers highlighted 3 ways to keep track of company finance in order to know how much the business makes and how business funds are spent.
1. Get an App: With the rate at which technology is growing globally, there is an app for everything. As a fashion entrepreneur, getting an accounting app can help take the weight of doing your calculations yourself off you.
When you go shopping, always take a pen and paper along to write out everything you bought and how much each items costs to input in your app later on. Try as much as possible, also, not to take along personal money while going business shopping.
2. Keep track of funds Manually: This method can be time consuming but is very effective in keeping track of funds, as far as you’re disciplined about it. Write out details of every transaction done, from amount received from clients to total cost of production and profit.
If you realise that you don’t remember details of some transactions, you can always consult your work schedule and bank statements to help you out. Doing this can help to totally track income and expenditure.
3. Get an Accountant: While this might seem like an expensive option, it doesn’t always have to be so. Instead of hiring a full time accountant, you can get an accountant to come in maybe twice a month to check your progress. This helps keep you on your toes and do your due diligence.
It takes discipline to do your finances yourself, literally having to pen every naira or kobo down, but it is doable. – Omowunmi Sowunmi.
Ways to Separate Company and Personal Finance
While both our designer have had problems with keeping company finance from personal finance and vice versa, they both agree that it is something that can be done. Here are some tips to help you separate finances;
1. Change Your Mindset:
The first thing to do is to completely change your mindset about company finance and personal finance. You have to consciously come to the realisation that the money of the business is different from your personal money.
My business money is not my money! Just because I have access to the account doesn’t mean I own it. – Olajumoke Tawose.
2. Keep Records of Everything:
No matter how big or how small a purchase is, it is important to keep track of everything the business does financially. Every kobo paid by clients and every kobo spent by the business must be unfailingly tracked.
3. Start Saving:
Money that has been put in a trusted saving platform is out of your reach for a while. Begin to save your personal money so you will have something to show for your work.
Also, when you know a particular amount will be deducted from your account, you’ll become more conscious of keeping track of your money. With savings, impulse spending of your personal money on items for the brand will stop because you know you need cash at hand to take care of your personal needs.
4. Consult your Accountant when you Need Help:
An accountant is a professional when it comes to issues surrounding finance. The input of an accountant can help you restrategise and identify a wider niche you can key into to make more money for the business. This willl help the business get funds it requires to begin to run on it’s own.
5. Get different Bank Acconts for Company and Personal Funds:
Many fashion entrepreneurs start out with using the same account for both company and personal monies. This is not very advisable as money can easily get mixed up and either company or personal needs will begin to eat into the other.
Getting separate accounts for both can really help you keep track of both finances and keep them out of each others way.
6. Never do Anything Without Checking the Books First:
Every decision you need to make for your brand should be made only after first going to the books. Things like hiring a new staff, purchasing bulk materials for storage and going for training should be done only after you have checked your books so as to avoid having to take funds for company needs from personal purse and vice versa.
Advantages of Separating Company Finance from Personal Finance
Separating company and personal finances has a load of advantages for you and your business. It helps;
1. keep track of the true financial state of your company,
2. ensure that neither you nor you company suffers financially,
3. you see what you need to set money aside for in the business e.g. marketing budget.
4. keep track on the growth of your company,
5. put a structure to payment plans for clients i.e. how much money clients should pay up front,
6. put a better payment structure around paying members of staff.
Olajumoke Tawose said, “Money is just a tool. It’s not about how much you earn but what you do with it. Be conscious about your finances. Read up, watch videos, join online communities about finances. Cultivate positive habits towards company and personal finance. Don’t just save, invest. It’s really easy if you commit to it.”
And Omowunmi Sowunmi said, “Separating personal funds from company funds might be hard but it is doable, especially if you are thinking of investment opportunities. Every business needs some form of investment to grow, and your records is what most people would ask for.”
Separating company and personal finances might prove to be a difficult task at first but if you keep at it it has the power to change your business for the better. Why not try it today?