Managing finances as a one-person business can be overwhelming, or even you may not want to deal with it. Like it or not, dealing with finances is one of the crucial parts of managing your business.
As much as we tend to do things that we like or are passionate about, the flow of your finances can affect your business activities if you don’t keep track of it thoroughly. But at the same time, it does not have to be complicated.
Why is managing money important in running a business?
Starting a business does incur a cost, and you would want to recoup back the cost by providing value to your customers or clients while being able to monetize your business at the same time.
While it can be too easy for you to spend your available money on an endless number of tools for improving your workflow and business, it can also bleed your cash flow in the long run.
I’m sure you wouldn’t want to be in a situation where you suddenly panicked when you found out that your bank account balance is negative. Therefore, it is crucial to keep track of your income and expenses of your business and see if the overall cash flow is positive or negative. In other words, see whether you managed to rake in net profit or loss.
If your cash is depleting as time passes by, you may not be able to expand your business further. That itself may require a fix that may not come in an instant.
With that said,
How can you manage the finances of your business?
If you still could not figure out on managing your finances, calm down. Take a deep breath…… and out.
This matter can mess your mind, but don’t be. Let’s declutter your finances in several ways (to be exact, five ways):
Pay the tools that you only need to use.
Don’t pay or subscribe to so many tools at the same time. Sure, the pricing may be affordable to your wallet, but by all means, identify if that is the tool you will use in the long run. If it does, make sure you have calculated the expected number of expenses for that subscription or tool throughout the year.
Take into account other tools that you may want to use too. The expenses can add up as time goes by without you realizing it.
Use accounting software or spreadsheet.
Of course, you have to keep track of your business money inflow and outflow. So, you do need to record either of them whenever there is a transaction involved.
For a start, you can use Microsoft Excel or Google Sheets to log your income and expenses throughout the month or year.
Ana from The She Approach has created an income and expense tracker template, and the only thing you do is just filling in the income and expense amount. As it is in the spreadsheet format, you can log your income and expense on Microsoft Excel or Google Docs in any device.
If you prefer a dedicated software rather than using a spreadsheet, I would recommend Wave. It is free, has a lot of features ranging from the usual income and expense tracking, and displays visuals such as money flow charts and pie charts.
Cut unnecessary expenses.
You may subscribe or purchase a lot of items and subscriptions, to the extent that you may not use any of those tools at some point. Again, keep track of all your expenses so that you can figure out what hasn’t used much and the most frequent usage.
It can be tough to cut off your subscriptions or purchase, especially when you feel that you may want to use it. But if you are going to use the tool or subscription again, you can always re-subscribe.
Also, if you are just starting out, don’t purchase or subscribe to expensive tools or web hosting, for example. Sometimes the cheaper options can set you ahead not only when creating assets but also saves you a chunk of your money, which can otherwise be spent or kept.
Deduct a certain amount of your income into a separate account.
Usually, you would only get to keep the certain amount of money you receive AFTER you deduct all your expenses. But what if you save a percentage or specific amount of your income BEFORE you use the rest to pay your expenses?
Does that make sense?
I get you. Your mind will be immediately blown off if you say you have about $1,500 in expenses, but you only have $800 left after you keep a portion of your income aside.
How is that possible?
Well, I never said that this method is easy. But, when you are short of a certain amount of dollars, you have to accept the challenge and figure out how to overcome it.
On the first thought, you may want to cut off more expenses to be at a level less than your income. But if that happens, you may not be able to do your work within your business as there may be certain tools that you need to accomplish your tasks.
How about if instead of cutting your expenses further, you:
Figure out ways to expand and diversify your income.
Once you managed to figure out the methods of monetizing your business or your site and get to cash in some income, you will realize that you can expand and diversify your income.
If you do need to use tools or subscriptions that require you to pay, figure out how you can expand your income, whether you would create another blog post, create an eBook, or create a new course.
Whatever means you would pursue, the ability to earn more income is limitless, but cutting your expenses do have setbacks in the long run.
To wrap up
Managing finances as a one-person business doesn’t have to be limited to cutting your expenses and balancing your budget. Sometimes, being unconventional with your methods can help you grow your business in the long-term.