Business Financial Management For Solopreneurs

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 – ProjectionsBusiness Financial Management For Solopreneurs

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.

Going Forward

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.

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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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14 thoughts on “Business Financial Management For Solopreneurs”

  1. It’s always so tempting to not track your progress (or expenses) as that takes up some time. However, I do agree with you that it’s crucial. And I completely concur to the fact that it’s extremely dangerous to just put the financial management on someone else and not keep track of it.

    In the past I have done similar kind of exercises and all I can say is that they are really, really valuable.

    I for a fact, before changing how I feel about and view money was in a scarcity mindset and that did not serve me at all. I also had these stupid beliefs about money, which were in complete correlation with that mindset. But once I changed that, good things started to happen. Way more opportunities arose. 

    However, I’ll try to give these also a shot, answering the questions rigorously. Will try to see, if I have any insecurities about money left in me. Exercise No. 2 is just busted in terms of how beneficial it is. No. 5 (PLANNING) is EVERYTHING.

    Thank you, Lowell! Cheers and have a Great One!Matiss

    • Matiss – I like that you discovered  a mindset that can definitely hold us back.  Thank you for your positive comments.  I hope others who have yet start looking at their finances will take your comments to heart.

  2. I find your post very fascinating. What I really agree with you is how the topic of money can be seen in a very broad subject. It is very important for anyone who want to achieve great wealth or lots of money to look within themselves and try to answer these questions you have outline truthy. If you are able to do that, you will be able to change some of your core beliefs about money and achieve lots of money. 

    Another aspect about money is we need to continue to educate ourselves and learn different ways to make money. This really boost our incomes and keeps us alert about all the global market opportunities. I thinks for the post, I really enjoyed it. 

    • Kuu – I find it interesting that you related to the internal/emotional aspect.  You are right that our mindset will guide us forward.

  3. Ive always believed that budgeting and financial planning will help you keep track of what’s coming in and out of your bank each month. I keep a journal that just shows me what I earn and what I can spend. Would you recommend any financial planning software that helps keep track of income and expenses easier? 

    • Ronan – I have used Quick Books successfully, but it’s a bit pricey for someone starting out.  And recently found a free one https://www.waveapps.com/ but have not tried it.  I’m experimenting with a plain old spread sheet  and will at some point share a template.

  4. It feels like there are so many steps when it comes to this.  I know it is a part of business and an important part that needs to be done.  The problem for me is it is the most boring part so when I get big enough in business to worry about it I will let my wife deal with it.  This was a great article because it is a reminder to another aspect of our business.

    • Dale – It becomes less boring when you start to work with the process.  I have to ask:  “Will your wife be the one making all the business decisions or will it be you?  Whose business is it?”  Financial Management is critical for making good decisions.

  5. HI, LowellAnn and thanks for putting this out there. It’s easy to understand why we need to have a knowledge of “Financial Management” if we are in a “Solo” business situation.  I think I read somewhere that having the right knowledge can give is peace of mind because we know what we should be doing.

    I used to have a “Solo” business many years ago and I had no knowledge about book keeping or anything to do with running a business.  This eventually became my downfall and I ended up out of business and owing a fair bit to suppliers.

    My first mistake was trusting a “Friend” who said he knew all about book keeping and would “make sure all my bills got paid”.

    Well… the vehical I was using was pushing a little black smoke when I went uphill.  It was a deisel engine and I didn’t know anything about deisel engines so I took it to a “Reputable” machanic.  He told me I needed a full rebuild which I later found out was not actually needed. That was my second mistake and pt me in a hole from which I never recovered.

    Long story short,  I learned a few lessons through that experience and never went into business for myself again until WA.

    I totally agree that anyone considering any kind of solo venture whether mom an pop or online, needs to do their due dilligence and learn all about business what the responsabilities of being a business owner are.

    Luckily for me, I married an amazing accountant 23 years ago who is very knowledgable about those kinds of things and the future is good.

    I was just wondering, however, if you could expand on this with refference to the online business end of things or, do these same principles apply?

    Thanks for you interest in helping others avoid the pitfalls of being a SOLOprenure and putting the info out there for others to find.

    Wayne

    • I’m so happy that you shared your story Wayne.  It doesn’t matter what type of business (online, service or local)  Financial Management is critical so that the owner can determine whether there is ROI (return on investment) and also to facilitate keeping the taxman happy.  My accountant had a great mantra “stay under the radar when it somes to the taxman”

  6. The best thing that you can do for yourself is to take care of your financial health.  You really need to know what money is going into and out of your business.  It is very important to know which expenses are fixed and variable in your business, you can not depend on the fluctuating changes as they always changing.

  7. Very timely and thorough message Lowell Ann. I am presently restructuring my financial picture and realizing it’s time for investing in business coaching and website support. Although it’s important to have knowledgeable and experienced mentors it’s a fine balance in terms of ROI. I’m positive this coaching will take me into new territory and move me towards a positive financial picture. Thoughts?

    • Hey Nancy – As a business coach, I too have determined that a coach will help me keep the focus on goals that I have set for this fourth quarter. Clear the decks and be ready to take the necessary actions. There are so many distractions these days and coaching is a great way to ensure accomplishment of one’s goals. It never hurts to get support from the online experts 🙂

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