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When you’re a solopreneur with your own business venture, one of the most important things you’ll do is learn how to manage your finances. You need to go into this with a healthy money mindset so that you can do what’s right with your cash, and ensure you manage to not only survive, but thrive in the long run. One of the biggest reasons businesses fail is not that they stop getting people wanting to work with them, but that they run out of money and cash flow becomes an issue.
To stop this from happening to you, we’re going to give you some helpful information on how you can begin managing your finances as a solopreneur. Take a look and see what you can do:
Have Both Personal And Business Banking Accounts
Having both personal and business banking accounts is one of the most important steps you can take when starting your venture. Your funds should not be mixed up, or you’ll have a disaster when it comes to doing your taxes – even if you have an accountant, doing this will help them to no end.
A business checking account is highly recommended for your business purchases and expenses. Ideally, you won’t have any business transactions flowing through your personal accounts, as it’s so much easier to manage your finances if you’re not trying to dig data out of all of the other information in there!
Put Money Aside For Your Taxes Continuously
Having a short term savings account that you put your taxes into will ensure you have enough to pay. Putting 20-30% into your short term savings account should cover state and local income taxes as well as your self employment taxes. Checking with a tax advisor should help to clear things up if you’d like more information. You’ll be able to pay quarterly tax payments when you set money aside on a regular basis, which should be a load off your mind. Remember, it’s always better to put a bit more away than you think you’ll need, just so you don’t run into any nasty surprises when you sit down to do your tax return.
Apply For A Small Line Of Business Credit
It’s a good idea to establish a credit line before you need it. You never know when you’ll need a little help with your cash flow, and it’ll be so much easier to establish credit before you really need to use it. You don’t have to use it until you need it, so make sure you’re sensible about it – don’t use it for anything other than a real need.
Have a Filing System In Place
Whether you go for paper or digital doesn’t really matter, providing you have a filing system in place that works for you. There are all kinds of things that can help you to file your information, such as enterprise solutions for mileage tracking, like the TripLog app. Then there are apps like Evernote that allow you to document receipts and other information. You’ll need to keep your accounting and bookkeeping records, as well as bank statements, contracts, permits and licenses, employee outsourcing records, vendor records, tax papers, and more.
Consider Using an Accounting Program
You can potentially keep everything using a spreadsheet, but there are free, low cost programs like Quickbooks that can be helpful. You should think of what your business really needs so that you can make the right decision. For example, do you need to send invoices? Do you have to manage inventory? Do you need to track your clients? Does it interface with your bank? Asking yourself appropriate questions like this will help you to decide.
Schedule Time So That You Can Stay Organized
Ideally, you should set aside each week so that you can organize your finances. You can use this time for things like scanning receipts, filing, etc. Add it to your to-do list just like you would any other essential task. Even just 15 minutes per week can be helpful, although some people find it better to do it once per month so they can get into the right frame of mind and get through it all at once. Whatever you do, don’t leave too long in between sorting this out.
Save An Emergency Fund
Having an emergency fund, e.g, 6-12 months of living expenses, will help you to cover the unexpected should you need it. This will help you when customer payments take longer than anticipated, and in many other emergency situations.
Don’t Underestimate Your True Business Revenue Potential
Earning more doesn’t necessarily have to be connected to doing more. Sometimes, all you have to do is shift what you are offering to your market. Review your revenue opportunities regularly so that you can pivot and make changes if you need to, allowing you to maximize your earning potential as much as you can. In some cases, it may even be that you’re underestimating what your current service is worth.
Just remember that earning more money will not automatically solve any and all problems that you may be having. It can actually cause more problems, especially if you’re not prepared for the growth, or you’re not in the right frame of mind to handle that much money. Being good with money takes practice, so make sure this is something you’re consistent with. If you struggle to manage $1000, then you’ll surely feel overwhelmed when it comes to managing 10 times that or more!
Ensure Your Lifestyle Is Not Ruining Your Business
You might have to take a close look at your lifestyle if you want to take control of your business finances. Your lifestyle really does have the potential to ruin your business. When you feel like you’ve had a great month, but you’re not seeing that in your accounts, consider how much of the money you have earned you’ve used to cover personal expenses. It’s all too easy to borrow from the business and use the money to cover things in your personal life. This could easily ruin the potential profits you could be making.
Pay Yourself First
This will help with the point above. Paying yourself first will give you the money you need to take care of your family, as well as other essentials. By giving yourself the correct salary, you’ll know you are moving in the right direction and you’ll have less financial issues as a result. You’ll need to be sensible with how much you’re paying yourself at first, but as your income grows and your customer base steadies, you may be able to increase. Keeping money in your business at all times is a must, so bear that in mind.
Try To Have Fun
Having numbers swimming around your head constantly can make owning your own business feel more like a chore than a fun venture. However, you should do your best to make this as fun as possible so that all of the work is worth it! By acknowledging your current financial situation and making a plan to improve, you’ll be able to enjoy all of the benefits that having more money can bring.
Hopefully, the advice here has helped you to manage your business finances as a solopreneur. Start now, and you’ll ensure that all of your ducks are in a row before the taxman comes knocking. You can never be too careful, or manage your money too thoroughly. Do you have advice or tips that have worked for you? Leave them in the comments below!
Thanks for reading!