Many solopreneurs would rather give financial management to someone who knows more. This is a very dangerous thing to do. We must have an intimate knowledge of the financial reality of our business on a regular basis, even if we choose to delegate the financial activities of bookkeeping, bill paying, and tax returns. Since many people have a resistance based in fear and lack of knowledge about finances, I provide Business Financial Management for Solopreneurs to help you discover why you want to avoid this important aspect of business and to gain a gradual introduction and comfort with financial management.
Exercise No 1 – The Emotional Part
Dig out your business journal and write about your associations with money. What thoughts? What feelings? How do these thoughts and feelings affect your day? What actions could you take to reduce any discomfort?
Exercise No 2 – Financial Health
Make a list of the indicators that will indicate the financial health of your business. What do you need to know or learn?
Exercise No 3 – Financial System
After one month of business, look at your business spending and group them together into categories (e.g. cost of goods, marketing, operations, tools, etc.). Do the same exercise for income (e.g. coaching, consulting, commissions, direct sales)
Now look at all expenses and determine which are fixed and which are variable. “Fixed expenses are those that do not fluctuate with changes in production level or sales volume.” “Variable costs are those that respond directly and proportionately to changes in activity level or volume.” You will soon learn how crucial it is to track expenses in this way to make planning, forecasting and bidding easier. (Source: Inc.com)
Exercise No 4 – Your Investment
Make certain that you record your initial investment. This includes money that you have taken out of your personal accounts and credit cards to pay business bills. Having these totals will help you determine whether you have achieved a return on your investment down the road.
Exercise No 5 – Projections
Considering your fees and time available to work at your business, make some daily, weekly, monthly projections. What are the projected income levels minus projected expenses? These projections will give you a realistic benchmark to compare actual income and spending. As time goes on you will develop enough data to assist in creating budgets to guide you.
Be sure to keep track of your expenses and income on a regular basis – right from the beginning. To not do this will cost you a lot of money in the future. Using a simple spreadsheet will be adequate until you have enough transactions and income to warrant the use of a bookkeeping program. Do your own bookkeeping for the first year of business and seek the advice of a qualified bookkeeping consultant or accountant. As time goes on you will gain financial awareness.
This post is presented by LowellAnn Fuglsang, Business and Career Coach, especially for those interested in becoming a solopreneur. BeingYourOwnCEO is presented as a support for you. You can join this community here: Weekly Being Your Own CEO Success Circle
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