“Money is always there but the pockets change.” Gertrude Stein
Most people have fear of finance that is because whenever we hear the word finance we think of accounts, debit and credit and complex mathematical calculations involving large numbers. However, interestingly if we understand psychology we can handle finance easily. Let’s look at finance from a different angle.
Financial gain is the core reason for us to start and run a business. It is also the motivational factor for people to work. Monetary transactions are involved in every stage of the life cycle of a business. While planning to start a new venture the three things that we calculate are project cost, resources and return on investment. Our belief about money helps us in deciding the project cost. If the project is too large or too small according to our social status it is bound to create trouble for the entrepreneur. If the project is large, then the person may not be able to handle it and if the project is small then person may not take interest in it.
Common mistake in deciding project cost is that we think of infrastructure and operational expenses but forget to calculate working capital and marketing expenses. Lack of working capital creates psychological pressure on the entrepreneur and the staff. Motivation becomes low. We think that we will invest as we earn but we cannot earn until we invest. Usually it’s the marketing budget that people cut on. This also creates pressure.
While deciding project cost we should keep additional funds from project cost for unforeseen circumstances or miscellaneous expenses. Lack of it can create trouble in case of emergency.