Being a solo entrepreneur has many challenges. On top of the list perhaps is the money management. If finances go wrong, there is no business to run!
Outright is a bookkeeping service for sole entrepreneurs and helps with cash flow management. Here are some tips we suggest:
The first step to managing your cash flow is understanding your finances. As an entrepreneur it is your responsibility to set up a service such as Outright, that tells you exactly what your income and expenses are. With our cloud based automation you will know your financial picture in real time. Once you own your finances, you will be in a strong position to strategize how to manage your money.
Knowledge is power
While setting up a product like Outright to understand the cash flow is the first step, it’s by no means the only. Once you can tell your profit and loss and income and expenses at a glance, it is crucial to do a study of the trends over time. For example, it behooves you to look at the yearly reports for your income and expenses separately to identify times when there is a crunch versus times of plenty.
Once you know the crests and troughs in your financial cycle start planning for the troughs. You might have low levels for two reasons: late payment for your services or products or a spike in costs during a certain season. For the latter reason, you should prepare in advance. Secure money when you don’t yet need it. You could get a credit line from your bank if you have a good history from them. You can also reach out to your suppliers and request them to give you extensions on payment terms. The key is to make sure you have good standing with these suppliers so that they are happy to accommodate you when the need arises.
Be aggressive about your receivables
Incentivize your payees to transfer funds to you as fast as possible. You can offer discounts for early payment. A big way to improve your collection times is to offer very easy ways to pay. In the world of instant connectivity, it’s often difficult to pay through slower means like checks, transfers. Offer easy online options like PayPal to get quick response.
Ultimately there will be times you will be in a tight spot financially. This does not mean you are a bad entrepreneur. It’s just the nature of business. The best way to prepare for financial downturns is to arm yourself with resources that will support you through them. Build connections with your suppliers and buyers. Help them out when they are in their financial potholes. Once you have a healthy, supportive network of individuals and businesses you work with, in the worst circumstances they will be the first to pay early or give that dues extension you so badly need.