One of the biggest challenges you will face or are currently facing as a self-employed professional is managing business finances.
This challenge leads to a variety of concerns that can become overwhelming. Some of the main concerns are:
- Feast or famine revenue cycles: You cannot predict your income because you oscillate from having too much work to having too little or no work at all.
- Fear of running out of money: There’s constant anxiety about not being able to cover bills. The fear continues even in months when your income is good because you’re not sure how long this good streak will last.
- Not earning what you deserve: You do a lot of work but take home very little. You also find it hard to charge what you’re worth. Despite your efforts, it feels like your business isn’t rewarding you appropriately, and it probably isn’t.
- Having to let go of paid help e.g. freelancers: Financial struggles force you to cut costs by taking on some or all the work yourself. You’re overworked, underpaid, and always stressed!
- Personal and business debts piling up: Insufficient income leads to mounting debt. This also creates friction at home and with extended family and friends as the debts pile up and the stress increases.
- Living month-to-month: This feels even worse than paycheck-to-paycheck because there’s no guaranteed income at the end of the month. When you were employed, you were assured of a steady income at the end of the month unlike now when you have months with little or no income.
These worries and fears will wear you out over time and turn you into a grumpy and always stressed version of yourself.
But there is hope. You can turn things around by taking steps to ensure that you manage your business finances better. You don’t have to wait until you have a stable income. Just start where you are today.
Here are…
5 Simple Ways to Take Control of Your Business Finances
1. Hire a Financial Coach
A Financial Coach can be a game-changer for your business. They will work with you to develop a personalized financial plan, improve your money management skills, and help you make sense of your numbers.
A Coach will also provide expert advice and accountability as you work on getting your business finances under control. Being accountable to someone outside of your business will keep you from spending unwisely.
The downside of this option is that it’s expensive. So if you’re already struggling with cash flow, it may not be the best one for you. Just note it down for action a little bit down the line when your business finances are more stable.
2. Review Your Expenses
A simple but often overlooked action is to thoroughly review your business expenses. Identify unnecessary and recurring costs that don’t add value to your business and cut these out. This action will help improve your cash flow immediately.
Here are some small adjustments that can make a significant difference over time:
- Reducing your subscriptions.
- Canceling unused subscriptions.
- Paying for subscriptions annually instead of monthly.
- Renegotiating vendor contracts.
- Hiring freelancers on an hourly or project basis instead of ongoing or open-ended contracts.
- Hiring an expert to manage your online ads instead of doing it yourself (if you have limited skills).
Also, consider using budgeting apps or software to track your expenses and income consistently. If possible, find a platform that consolidates paying all your expenses from one place at a low fee. This will help save money and also give you access to all your expenses in one place.
I currently use BOYA to manage my expenses. With this platform, I can make MPESA and online payments and have one monthly statement.
BOYA also integrates with most financial programs so you can upload your statement directly into a program like Quickbooks, Zoho, or Xero. This helps prevent making mistakes when entering expenses into your financial program.
3. Separate Personal and Business Finances
Many self-employed professionals make the mistake of mixing personal and business finances, which leads to confusion and financial instability.
Opening a separate business bank account and getting a business credit or debit card will help you draw a clear line between your personal and business spending. This not only makes it easier to track expenses but also helps you avoid spending business funds on personal items.
Some platforms like BOYA provide virtual and physical debit and credit cards. You can allocate such cards to yourself and key employees for business-related spending.
4. Create a Cash Flow Forecast
A cash flow forecast helps you project future income and expenses. This gives you a clear view of when you might face a shortfall. Regularly updating this forecast allows you to anticipate lean months and prepare accordingly.
There are numerous free online tools and templates that you can use to create your forecast, which makes this an accessible solution for anyone who wants to manage their business finances proactively.
If you find yourself struggling to understand or use the free tools and templates, you can hire an Accountant at a low cost. While this may seem like an expense, this person’s expertise will save you time, energy and money.
5. Implement the Profit First System
Finally, one of the most effective yet simple approaches is to implement the Profit First system. This business financial management strategy is a great resource that will help you take and maintain control of your business finances.
The Profit First method not only promotes better cash flow management but also builds financial discipline over time. By setting aside a portion of every payment as profit, you ensure your business stays profitable from the start.
Profit First has transformed businesses worldwide. It’s easy to implement even for people who have no financial training or knowledge
You can start by getting the Profit First book and working through it on your own. Additionally, check out this YouTube channel for free lessons on how to set up and implement Profit First.
I struggled with my business finances for years before I found this system and it has made financial management so much easier.
Over to You…
Managing your business finances doesn’t have to be a constant source of stress. By taking steps like hiring a financial coach, reviewing expenses, separating personal and business finances, creating a cash flow forecast, or implementing a system like Profit First, you can regain control and ensure your business remains profitable.
Remember that consistency is the key to success with these steps. And the sooner you implement these changes, the sooner you’ll start reaping the benefits.
Are you struggling with your income due to low pricing?
Many self-employed professionals charge way below what they are worth. They also struggle to match the value they bring to their clients with the fee they wish to command.
If this is you, check out my e-course Profitable Pricing for Self-Employed Professionals. During this 12-week self-administered course, I’ll help you take the steps required to price accordingly and finally get paid what you’re worth!
Click here to find out more about the course.
(Image Credit: Pexels)
