If you’re a solo entrepreneur, you already understand the startup mindset. You know that good record keeping is essential for a successful business, but you’re a bit overwhelmed. If you’re feeling this way, you’re not alone.
As a solo business owner, you’re ambitious and ready to take on new challenges. However, with 22.5% of small businesses failing in the first year, you need all of the help you can get managing cash flow.
How can you master your own cash flow management to ensure a brighter future for your business? Follow these tips below.
1. Separate Your Business Cash Flow
The first step is to make sure your business and personal finances are separate. The line between business and personal gets blurry easily if you’re not carful, especially for solo business owners.
However, if your business finances are mixed up with your personal funds, it’s hard to keep an eye on the money coming in and out of your business. You need to plan for the future by creating separate financial statements just for your business.
Create a clear, consistent system for understanding your business cash flow. Some of the best tools for small businesses will do this for you.
2. Always Get Receipts
While it’s true receipts are annoying, they’re a necessary evil for business owners. This is especially true for solo business owners. Always get receipts for any business expenses. A business expensive is any of the following:
- Business travel
- Office supplies
- Tech equipment
- Software and tools
- Networking events and conventions
- Office expenses
- Marketing fees
All of these small things add up to big savings when tax season comes around. Thought they might seem small, you’ll want to refer back to them when it’s time to file your income and deductions with the IRS.
3. Go Paperless
Another important way to manage your cash flow is to go paperless. While it might be tempting to use paper organizational systems, this is a one-way ticket to increasing clutter in your office space.
While some vital paper documents might be necessary, go paperless whenever you can. You can organize bills, receipts, and account statements much more effectively digitally.
4. Use a Business Account
This goes back to the first tip of separating the personal from the business. If you want to manage your cash flow, you need to use a business account for business-related expenses.
You’ll need to open a dedicated business bank account. If you’re an S corp, LLC, or other incorporated business, this is legally required. Even if you’re operating as a sole proprietor, you’ll still want a professional business account to keep things separate and organized.
5. Choose Your Accounting Software
Last but not least, don’t try to handle everything on your own. You likely chose to take your side hustle full-time as a way to do more of what you love. Unless what you love is book keeping, you probably want to free up time to focus on your business.
You don’t need to hire an accountant or assistant to manage your money. There are a lot of great free or low-cost accounting tools and software to choose from:
Any of these above will help you manage cash flow with ease regardless of your business type of experience.
Set Your Business up for Success
If you’re running a solo business, you have to be lean in your thinking. You also have to be strategic, especially when it comes to your cash flow. If you’re not careful, you could face financial challenges down the road.
Luckily, it’s never been easier to create a cash flow management system that works for you. These tips above ensure you’re always on top of your next decision.