Monday, November 20, 2017

6 Money Management Tips for First-Time Entrepreneurs

That $5 coffee every morning isn't taking you to the next level any faster than brewing a pot at the office.

How many times have you been told that saving money is a good thing? Financial specialists recommend that you save a bit of money every month, but that's easier said than done. After all, it’s not uncommon for people to live paycheck to paycheck.

However, if you want to start a company, you’ll need to break away from this cycle and start budgeting and saving. At times, this will be a trying task, but it must be done if you want to invest in your future as an entrepreneur.

If you want to start managing your money more effectively and set yourself up to become an entrepreneur, follow the six tips below. With these techniques in your arsenal, you’ll start so see immediate changes, and you’ll set good behaviors in motion that’ll serve you throughout your career as an entrepreneur.

1. Prioritize organization.
When you are organized, you can track every facet of your finances. Record all of your financial information in one place so you can refer to it and keep track of your progress.

When you chronicle all of your financial information, you may want to try and organize it by category. For example, when you are recording your current costs, you can categorize them as “urgent” and “future.” Not only will this system help you stay on top of your personal finances, but it’ll prepare you for entrepreneurial success because it’s a directly transferable skill.

2. Check your credit.
According to a recent MoneyTips survey, nearly 30 percent of people don’t know their credit score. If you are among this group, it’s time to request a free credit report. Once you know your number, assuming money’s tight, feel free to use a few do-it-yourself credit repair techniques to quickly improve your score.

Understanding your credit score and improving it to the best of your ability is paramount when it comes to money management. A little-known fact among aspiring entrepreneurs is that the funding a new business receives is often dependent on the founder’s credit score.

3. Save where you can.
People often cringe when they think about cutting back. Fortunately, there are several painless ways to save. Look at your daily habits and see if you have any spending trends. For example, if you spend $5 every day on lattes, you might consider cutting back and only having the expensive latte every other day. Slowly, you’ll get used to this new habit, and your bank account will reap the rewards.

4. Search for additional information.
Have you heard of The Penny Hoarder or Dough Roller? These are just two personal finance blogs that can help you better manage your money, but there’s a whole lot more out there.

Subscribe to websites and follow podcasts that offer advice on money management. Also, keep your eyes peeled for informative outlets that speak directly about entrepreneurial finances and follow them, too.

5. Set long- and short-term goals.
Have you ever noticed that people want to reach their goals in as little time as possible? If you pick up almost any given health magazine, it’ll claim that it can help you achieve extreme results in little to no time. Unfortunately, crash diets are often ineffective, and “get rich quick” money management techniques often lack substance.

It’s hard to accept that your goals will take time to accomplish, which is why you create short- and long-term goals. In either case, aim to make goals that are specific, measurable, attainable, relevant and time-based. Ideally, accomplishing your short-term goals will give you the positive feedback that you need to continue striving for your long-term goals.

6. Find a mentor.
If you manage your personal finances and entrepreneurial finances, one thing is certain -- at times, it will feel like you can’t keep up with everything. Financial planning can be difficult, and it’s not uncommon for it to feel overwhelming.

As an individual, you can seek out mentors that can help you with personal finances. As an entrepreneur, you can continue to work with these people or seek out more established financial consultants that provide you with guidance you need to run your business.

Managing your finances is a trying and rewarding experience. It will feel messy at times, but the more you practice, the more you’ll improve your personal finances and set yourself up for entrepreneurial money management success.

Image Credit: Sarinyapinngam | Getty Images

Theresa Todman, Managing Partner/CEO of B&M Financial Management Services, LLC . Theresa works with small business owners and entrepreneurs to assist them with financial management and creating organized systems and procedures. She specializes in bookkeeping, accounting, QuickBooks solutions, small business tax issues and consulting.

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Friday, November 17, 2017

Think Like a Startup to Boost Your Finances

Learn valuable lessons about your personal finances from the successes and failures of entrepreneurs.

1. Focusing on too many things can kill your finances

Spreading your financial goals too thin can often do more harm than good. Successful startup founders often find that a service that does one thing really well works better than a service that tries to do many things.

Venture capitalist and PayPal co-founder Peter Thiel advises all budding entrepreneurs to think hard and pursue a single idea that nobody else is doing. In an article for The Wall Street Journal, Thiel asked entrepreneurs, "What valuable company is nobody building?" The answer to this question is harder than it looks.

Personal finance lesson

Keep things simple. Focus on the biggest issue affecting your finances. For example, hone in on paying back a 401(k) loan or eliminating high-interest credit card debt.

2. Forgetting that cash is still king

Startups famously burn through cash for "growth," believing they will land yet another round of capital the next time around. That plan cannot only backfire, but become the death sentence of some startups. An example of this is server chip designer Calxeda. Despite raising $131 million in four rounds of financing, executives had to shut down operations in 2013 and declared, "We simply ran out of money."

Personal finance lesson

Plan ahead and be ready for periods in which you won't get a constant paycheck. Even when receiving payment from your employer, sometimes paychecks can bounce! Pay yourself first out of every paycheck and build an emergency fund to cover your basic expenses for three to six months.

3. Preparing to be wrong

"Pivot" is among the top three terms most used by startup founders. And for good reason: There are countless stories of million-dollar ideas that flopped but were able to turn into much more profitable ones after a well-timed adjustment.

Take Payal Kadakia, for example, who first founded Classtivity (a self-described "OpenTable for fitness classes") with a pay-per-class model. About two years into operations, Kadakia's service wasn't seeing the user traction that she was seeking. So, she pivoted Classtivity into ClassPass, a monthly $99 subscription that lets users go to any class at any participating gym. Once a struggling startup, ClassPass is now a $470 million business.

Personal finance lesson

If the plan isn't working at all, it's time to change the plan. Consider these facts:

  • 50 percent to 70 percent of college students change their majors at least once and most will change majors at least three times before graduation.
  • American workers stay on the same job for a median of 4.2 years, according to MarketWatch.
  • The average person changes jobs 10 to 15 times (with an average 12 job changes), according to data from the U.S. Bureau of Labor Statistics.
Change is inevitable, so welcome it and make the most out of it. It may very well improve your financial situation.

4. Outsourcing nonessential activities

"Spend your calories on things you do well and the things that make you and your business valuable — and outsource things that aren't core to that mission," Jeff Haynie, co-founder and CEO of Appcelerator, wrote for Recode. From accounting to employee meal planning, startups are well known for outsourcing as much as possible to keep overhead costs down.

To improve your overall productivity, Matt DeCelles, co-founder of sunglass retailer William Painter, recommends mapping out all tasks and determining which ones may be better completed by another person. By focusing on core operational activities, DeCelles is able to make the most out of his day.

Personal finance lesson

Remember complaining about how you never seem to have time to balance your checkbook, organize your tax deductions, or get an additional quote for a home or car loan? Spending money on "help" to complete these tasks can save you a couple hundred dollars in the long run.

If you think that you need to be a high roller to hire somebody, think again. Leverage gig economy sites such as Fiverr, Elance, ODesk, Fancy Hands, or Zirtual to post your tasks, find talented freelancers, or hire a virtual assistant for as little as $5 to $10 per hour, depending on the type of task.


Theresa Todman, Managing Partner/CEO of B&M Financial Management Services, LLC . Theresa works with small business owners and entrepreneurs to assist them with financial management and creating organized systems and procedures. She specializes in bookkeeping, accounting, QuickBooks solutions, small business tax issues and consulting.

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Thursday, November 16, 2017

4 Automatic Money-Savers For Your Small Business

Chances are, if you look carefully through all of your expenses, there are a lot of hidden potential savings. A lot of small ongoing expenses add up to an overall big expense. But, let’s face it, we don’t always have the time to go through our expenses with a fine tooth comb. So, here are four things you can do to ensure you’re automatically saving money without you having to go back and do the work to check up on it.

1. Install the Gumdrop by Goodshop browser plugin on all of your company’s computers. This new add on automatically applies the best coupon at check out when you shop online at thousands of stores like Office Depot, Best Buy, Apple, and Target to name a few. That means the next time you or one of your employees buys something for the office, if there is a chance to get a discount, it will happen without you doing a thing! The other added benefit of Gumdrop is that you can select a charity and a portion of what you spend will go to that cause.

2. Keep all of your equipment on a power strip and turn it off at the end of the day. According to some studies, that can save you nearly $100 per year per computer. That adds up quickly as you add employees. In addition, set your printer to automatically print on both sides of the paper.

3. Get a smart thermostat for the office. This means that you can decide when the or heat goes on ahead of time and you’ll never forget to turn it off when the office closes. Accidentally keeping the air conditioning on all night long — or even worse, all weekend — could be sucking much needed funds right out of your coffers.

4. Let your credit card pay you. Either get a small business credit card which provides you with rewards that you’ll be able to use later or get a cash back credit card which in essence gives you an automatic discount on all your purchases. Granted, you will likely be charged a fee for these cards, so make sure you are using the card enough to make it worth it.


Theresa Todman, Managing Partner/CEO of B&M Financial Management Services, LLC . Theresa works with small business owners and entrepreneurs to assist them with financial management and creating organized systems and procedures. She specializes in bookkeeping, accounting, QuickBooks solutions, small business tax issues and consulting.

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Wednesday, November 15, 2017

How Can You Save Money As An Online Seller?

While operating an online business can have its advantages, it also can have several costly drawbacks. Shipping internationally, dealing with international currency exchanges, and more can seriously bring down online sellers’ profits and hinder their success as a company.

However, there are ways for an online seller to save money on traditional costs of doing business globally in an online-only platform. By thinking out of the box and realizing that no savings is too small to make an impact, online sellers can streamline their business model and save money hand over fist in multiple ways. Let’s look at five ways online sellers can reduce costs and thrive in their businesses.

Using Online Money Transfer Companies

Currency exchange can be a huge expenditure for online sellers, and many of them don’t even realize that it’s taking so much away from their business’s bottom line. To keep things simple, many online sellers use default currency exchange programs targeted at online sellers. For example, Amazon’s currency exchange service charges a 4% fee. Although that seems like a small price to pay for currency exchange, the fact is that it adds up. Instead, online sellers should consider using an online money transfer company. Online Amazon Currency exchange alternatives offer currency conversion for sellers with excellent exchange rates, and no or low additional fees.

Consider Coffee Bags (Or Other Alternative Shipping Options)

Shipping globally (or even just locally) can be incredibly expensive. Bulky boxes, padded envelopes, and other traditional methods of shipping can be costly. If the product you’re selling isn’t breakable or sizable, you should consider alternative shipping options. One example is coffee bags. The bags are lightweight, portable, and easily bendable. That makes shipping costs lower and still protects your product during the shipping process.

Alternatively, you can buy packaging in bulk from a number of online retailers. By purchasing in bulk, you’re ensuring that you’ll always be prepared to fill orders, and you’ll be saving money on your overall shipping costs. You can also look to ship in bulk, or see if your suppliers ship directly to your customers.

Streamline Your Software

There will always be newer, more expensive software options available to online sellers. From ecommerce software to accounting programs, there are countless options. To save yourself money, streamline the types of software you use. Rather than always being willing to invest in the latest and greatest technology, take a step back and consider the big picture. If your current software works, you may not need a costly upgrade. Additionally, you’re likely using software you don’t even need. If it isn’t actively adding value to your business, streamlining your selling process, or making you money, you may not need it at all. Save yourself money by being selective and reading through software reviews carefully before committing to a product.

Focus Your Inventory

Are you offering too much as an online seller? Take a hard look at your inventory. In many cases, it’s actually more profitable to narrow the kinds of products you sell online (or flash-sell them). Too many products leaves too many options for customers, and too wide of a customer base, making it harder to market your business. Additionally, when you offer fewer products you can often charge more as your merchandise becomes specialized or marketable to a “niche” audience. Another added benefit: you’ll be saving money on supplies, product, shipping, and packaging materials. All while offering more specialized products to a more profitable customer group who are genuinely interested in exactly what you sell.

Ask for Discounts

When you work with other online sellers to build your inventory, coordinate shipping, exchange currency, and more, you’re in a unique position to negotiate. All of your fellow online sellers are understanding of your position, and they stand to benefit from offering you a small discount in exchange for bulk purchases or your loyalty as a frequent buyer. When you ask for a discount, be upfront about your reasoning, and don’t ask for something that’s completely out of the question. If it’s a discount you wouldn’t be willing to provide, it’s likely not going to happen. But, even if the discount you score doesn’t seem like much, remember that a small discount here and there can go a long way.

These are just some of the few ways online sellers can save money, and they ultimately boil down to the same concept. None of these money saving tips will double your profits, but when you focus on running a lean online selling operation small savings add up. By evaluating all aspects of your business spending, you can minimize expenses to maximize profits.


Theresa Todman, Managing Partner/CEO of B&M Financial Management Services, LLC . Theresa works with small business owners and entrepreneurs to assist them with financial management and creating organized systems and procedures. She specializes in bookkeeping, accounting, QuickBooks solutions, small business tax issues and consulting.

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Tuesday, November 14, 2017

Top 5 Small Business Money Mistakes

A long time ago, in a galaxy far, far away, I practiced law. My practice dealt mostly with small business, and mostly it was fun – helping new entrepreneurs start their ventures, helping them get financing for expansion, that sort of thing. But, of course, given the nature of the gig, not all news was good news. I certainly had my share clients who needed help getting out of hot water.

None of them planned on getting in over their head of course; no small business owner does. But good intentions are not enough. The problem is that, generally speaking, seemingly small money mistakes turned into big business problems because the owner didn’t take the time to correct the problem before it got out of hand.

It is no secret that being in business for yourself also means that you will make mistakes; mistakes and business go hand-in-hand. So the question is not whether you will make a mistake (or two or three), but whether that mistake will be minor or major. Minor we can live with, major, no so much.

Here then are the five money mistakes small businesses make most often, and how to avoid them:

5. Not controlling overhead. Back in those lawyer days, the one thing in common that most of my bankruptcy clients shared was that they did not control their spending. When money was flowing freely into their business, spending, of course, was easy. The problem came when they were hit by the inevitable business cycle and they were unprepared for any sort of business downturn. It was then that their free spending ways caught up with them.

The lesson is clear, and easy to implement: Keep your overhead low.

4. Thinking small. A seemingly opposite problem is that not a few small business people start out doing everything themselves and never get out of the habit. And the problem with that is that it truncates growth.

Getting the help you need, and preparing for and landing bigger contracts requires that you have a vision and think big.

3. Not diversifying. As an investor, would you ever own just one stock? Of course not, because you know that that stock could go up, but it could also go down. Putting all of your investment eggs in one basket is far too risky, and that is why financial advisors always suggest that folks “diversify their portfolio.”
Well, the same is true for your business. If you only have one profit center – one main product or service – you are doing the business equivalent of owning a single stock. The answer therefore is to create additional profit centers – new ways of generating income.

2. Not incorporating. The next two mistakes are tied-in with one another, but need to be separate entries because they are not exactly the same. Here, the issue arises when a small business is run as a sole proprietorship or partnership and not some sort of corporate entity – an S or C corporation, or an LLC.
When you incorporate, you create a separate legal entity, and that in turn protects your personal assets from business liabilities; business problems will not threaten your personal assets (like your home.)

And the Number 1 money mistake small businesses make is,

1. Not separating business and personal credit. By the same token, far too many small business people do not separate their personal credit from their business credit, or, worse, fail to create separate business credit altogether. As with not incorporating, not only does not separating business and personal credit put your personal credit and wealth at risk, it stifles your business’ growth.
The good news is that if you avoid these five mistakes, the chances of ending up in your lawyer’s office for the wrong reasons will be slim.


Theresa Todman, Managing Partner/CEO of B&M Financial Management Services, LLC . Theresa works with small business owners and entrepreneurs to assist them with financial management and creating organized systems and procedures. She specializes in bookkeeping, accounting, QuickBooks solutions, small business tax issues and consulting.

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Monday, November 13, 2017

6 Money Management Tips For The Newly Self-Employed

If you’re setting out on your own and starting your own business, you might find yourself struggling to pinpoint the best way to handle your income. There are many questions that you may have, and taking the wrong path could mean that you wind up running out of money, or owing thousands in taxes that you can’t afford. If you need to get a fix on your financial situation and you don’t know where to start, check out these tips for making the most of your money.

Make a Budget

Your first step if you want to make sure that you’re making the best decisions possible with your money is to sit down and figure out a budget. Just like packing a map (or more likely in today’s world, a GPS of some kind) before heading out on a trip, coming up with a budget before you do anything else will give you a solid frame of reference for all of your subsequent decisions.

Put Aside Money for Taxes

One of the biggest mistakes that you can make when running your own business is to fail to set money aside for taxes. This is something that people may not even think about, especially because employees at regular jobs have their taxes automatically withheld. Unfortunately, the freedom of self-employment comes with the burden of handling your own taxes, and in most cases with paying them quarterly instead of yearly. Talk with a professional to determine how much you need to be putting aside for taxes, then make sure to keep current. Thousands of dollars of back taxes and late fees are easily enough to cripple or destroy your small business.

Pay Yourself A Salary

It can be hard to get past the thinking that every dollar you bring in should be yours to do with as you please, but putting yourself on a salary is a necessary step to help control your business’ finances. If you’ve determined that you can live comfortably on, say, $4,000 a month, pay yourself that amount every month. If you have a better-than-normal month, resist the urge to take more, and instead leave the surplus in your business account to compensate for the months that might not be so good.

Think In Percentages

Other than your salary, the way you divide up your money should be done by percentages and applied to every check that comes in. If you’re putting 30% away for taxes and 10% away for retirement, stick to those numbers whether you get a $10,000 check or a $50 one. That way, you have a uniform plan that can be easily applied to any amount you receive.

Set Up An Emergency Fund

An emergency fund is often touted as a good idea for everyone, but when you’re self-employed, it’s an even bigger necessity. This fund should have enough money in it to cover your basic expenses for 3-6 months at the least, and should only used as a last resort. Think of this as your safety net for your worst-case scenario, such as a long period of no sales, a lawsuit, or your business going under.

Start Planning For Retirement

This statement can apply to everyone from teenagers to seasoned business veterans – if you’re not planning for your retirement, you need to start. It may seem like a daunting task to begin on your own, but there are plenty of professionals out there that can help you choose the right plan for your situation and help you get set up. It’s easier than it seems, and you’ll be thanking yourself for taking those steps as you approach retirement age.

A little planning combined with spending discipline will make sure that your business can weather the rough months and make the most of the good months. The stability of working for someone else may be something that you miss, but if you’re smart, you can have the same amount of stability all by yourself.


Theresa Todman, Managing Partner/CEO of B&M Financial Management Services, LLC . Theresa works with small business owners and entrepreneurs to assist them with financial management and creating organized systems and procedures. She specializes in bookkeeping, accounting, QuickBooks solutions, small business tax issues and consulting.

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Friday, November 10, 2017

Business Health: How Much Money Are You Really Making and Spending?

How healthy is your business?

If you can’t answer this question with hard numbers, then you don’t really know. The most successful companies have systems in place to make sure that profit is prioritized, expenses are controlled and stakeholders are regularly updated about about progress.

Here are seven ways to see how much you’re really spending and earning.

1. Review Your Chart of Accounts
Your chart of accounts is a listing of each account that you use for transactions as well as the account number. In order to track your expenses and profitability, your chart of accounts needs to be both comprehensive and easy to understand.

If you don’t review and update the chart of accounts each month, your financial statements may not be clearly stated. The balance sheet, for example, should separate assets into current and long term categories, and an income statement must separate operating income from non-operating income. The chart of accounts helps you generate the right information for these two financial statements.

The importance of this cannot be understated. Assume, for example, that Patty manages Marshall Landscaping, a business that generates $10 million in annual sales. Marshall’s work includes landscaping, tree services, and fence installation, and Patty considers these three areas to be profit centers.

If Patty’s chart of accounts uses the account number #7000 for total revenue, for example, Marshall should have subaccounts for each profit center. Assume that account #7100 is landscaping, #7200 is tree service, and fence installation is assigned #7300. Every revenue and expense category should have a subaccount for each profit center, so that Marshall can calculate the profit of each service it provides.

Each revenue and expense account should also have a specific description, and no expense accounts should be labeled as “miscellaneous”. This policy forces management to assign each expense to a specific category.

2. Automate Your Income and Expense Tracking
Use accounting software that allows you to link your bank account and credit card activity directly into your accounting records. This task is important because it ensures that you’ll capture all of your business activity for the month.

Entering information manually can be a problem, since it’s a time-consuming process. Given the amount of input required, many businesses put off entering monthly transactions until after the month is over. This delays the firm’s ability to generate month-end accounting reports and financial statements meaning that you might not discover problems until much later. Manual input also increases the risk of human error.

3. Use Accrual Accounting for
Maintaining the chart of accounts allows the business to use accrual accounting to track expenses and profit. Accrual accounting posts revenue when it is earned and records expenses when they are incurred. Revenue transactions are matched with the expenses that were incurred to generate the revenue.

This is different than cash basis accounting, which posts transactions based on cash inflows and outflows. Every business should use accrual accounting, because cash basis accounting can create misleading financial results.

Marshall, for example, uses accrual accounting for its June month-end payroll. Workers will not be paid for the last week of June until July 3rd. To properly account for payroll on June 30th, Marshall posts a $70,000 debut to wage expenses and a $70,000 credit to accrued wages payable. When employees are paid on July 3rd, Marshall debits (reduces) accrued wages payable $70,000 and credits cash $70,000 to pay employees.

Accrual accounting posts the wage expenses to the period when the work is performed (June). Cash basis accounting, on the other hand, posts the wage expenses when the payroll is paid in cash (July). Accrual accounting posts revenue and expenses to the proper time period, which allows Patty to track profitability.

4. Use Variance Analysis to Find Opportunities for Improvement
Every business should have a formal budgeting process that produces a budget for the upcoming year. Many companies start the budget process before year end, but don’t complete the process until after the new year starts. But in order to track every dime of expenses and profit, the budget must be in place on January 1st of the new year.

Successful companies also compare the budgeted amounts to actual results at the end of each month, and use that analysis to make improvements to the business. This process is called variance analysis, and it helps the business stay on track during the year.

An owner should review variances and investigate the largest dollar amount variances first. This strategy allows the owner to make changes that will make the biggest financial impact.

5. Correct Pricing and Estimates on a Regular Basis
Assume that Marshall purchases mulch for landscaping. When Marshall bids on landscaping work, it includes a mulch cost per square foot. Patty reviews her landscaping costs for May and notices that the actual mulch cost per square foot is 15% higher than the budget.

Patty investigates the variance and finds that some new workers are using too much mulch on each job. Patty can train her employees and reduce the mulch expense to the budgeted amount going forward.

6. Study Your Profit Margin Ratio
Performing variance analysis will keep a business on track, and increases the chances of reaching the budgeted profit total. After Patty reviews all of the variances, she can analyze profitability by profit center. If, for example, the tree service business generates a 15% profit, rather than the 12% budgeted profit amount, Patty should be able to find out why. It may be that tree service labor costs have declined below the budgeted rate per hour, which generates a higher profit.

Profit margin is a great tool that allows you to compare profitability between profit centers. Profit margin is defined as (net income) divided by (sales), and this ratio measures the amount of profit earned on each dollar of sales.

Assume, for example, that the landscaping division has a $400,000 profit on $4 million in sales, and that the tree service division earns a $450,000 on $3 million in sales. The landscaping division has a 10% profit margin, while the tree service division earns 15%.

The profit margin ratio allows you to compare the profitability of product lines with different levels of sales. Since the tree service profit margin is higher, Patty may decide to shift the firm’s marketing focus to the more profitable division.

7. Automate Your Accounting

Managing a business requires you to make dozens of decisions each day, and it may be difficult to monitor your financials. If you don’t stay on top of your expenses, however, your business profitability may suffer.


Theresa Todman, Managing Partner/CEO of B&M Financial Management Services, LLC . Theresa works with small business owners and entrepreneurs to assist them with financial management and creating organized systems and procedures. She specializes in bookkeeping, accounting, QuickBooks solutions, small business tax issues and consulting.

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Thursday, November 9, 2017

4 Money Management Tips For Freelancers

Close to 54 million Americans work as freelancers and they make 17% more an hour than full-time employees do. In other words, freelancers can make bank. Even so, it’s still hard for freelancers to stay afloat.

In some cases, it’s because they work fewer hours than their 9-to-5 counterparts. Fewer hours means less money, even if they make more per hour.

In other cases, it’s because they don’t know how to handle all of the money coming into their bank accounts. Whether you work a full 40 hours or you’re getting by with less, you need to know how to manage your money. Follow these tips so your freelance business can be a money making machine.

1. Set up milestone payments

It’s impossible to manage your money if you don’t have any. Unfortunately, the nature of the freelance world makes it hard to determine when money will come across your desk or hit your PayPal account.

You can get some of that control back with milestone payments. Whenever you take on a project, set up milestones. Your client will have to agree to pay each milestone payment before you move forward with the project.

Of course, you won’t need to set milestones up for small projects, but you will need to do so with large projects. That way, you can keep cash coming into your business.

This doesn’t just help you with your cash flow issue. It also helps you avoid non-payment and collections problems.

Collections issues are becoming a serious problem for freelancers. Some desperate freelancers have even started using social media to smear non-paying clients, but professionals warn against that. There might be legalities involved and you could end up in hot water.

Instead, set up milestones so you won’t have to spend as much time chasing down clients. Some people might skip out before they make that final milestone payment, but at least you’ll only be out $300 instead of $3,000.

That will help with your financial issues and your legal concerns as well.

2. Prepare for your taxes

Bloomberg recently reported on the rise of the 1099 economy. Due to the boom in the freelance economy, more people are getting 1099s. The relationship between W2s and 1099s is no longer cyclical, with freelancers gaining ground on waged employers.

As a freelancer, you likely have a lot of these forms. You might have them from Upwork or other freelancer sites, as well as various companies. This means you also have a tax obligation. Don’t make the mistake of paying all of your taxes during tax season. Instead, pay your taxes quarterly.

Use a self-employed tax calculator to determine how much you owe each quarter. Then, send the IRS a check. If you do this correctly, you’ll only owe for the last quarter during tax season.

3. Create a budget

It’s easy to feel out of control when you’re a freelancer. You might make $100 today and $1,000 tomorrow. With money coming in at different times, budgeting can seem impossible.

Still, you have bills to pay so you have to figure out a way to budget your money. This is actually simple. Let’s say that you’ve been freelancing for a year. During that time, you have made an average of $5,000 a month. That would be your projected cash flow. You would need to subtract your expenses from that amount and set your budget.

Not only will this help you avoid impulse buying, it will also help you get better at getting the biggest bang for your buck. You can prepare your own meals instead of eating out, get dental care abroad at a fraction of the cost in the U.S., travel off-peak, turn-off the TV or explore a dozen more ways to save money. And you can finally go after your bigger goals like putting “free” in freelancing, buying your first home or retiring early, which leads to my final point.

4. Get ready for retirement

Nearly 45% of working-age households don’t own any sort of retirement account assets, and you can bet that a large chunk of those households contains at least one freelancer.

Why? They don’t have employers who are willing to set up their retirement accounts for them and then match their earnings. This doesn’t mean you should ignore retirement.

First, pay off all of your debt so you can think about retirement. That doesn’t include your mortgage debt. It’s okay to carry a mortgage, even as you move toward retirement.

Then, invest 20% of your income into retirement. You can invest in a Simplified Solo Pension, Solo 401(k), or Savings Incentive Match Plan for Employees.

While the Savings Incentive Match Plan for Employees is typically for small business owners, it also works for freelancers, especially those who intend to scale up their businesses. For instance, if you intend to hire some freelancers to work under you, this might be the best option since it will be easy to grow your business. You can transition from a sole proprietor into a business owner without any problems.

Money management is an important part of any freelance business. There will be days when you’re flush with cash, and days when you don’t have anything coming into your accounts. If you manage your money properly, you won’t have to worry those ups and downs.

Image Credit: Shutterstock

Theresa Todman, Managing Partner/CEO of B&M Financial Management Services, LLC . Theresa works with small business owners and entrepreneurs to assist them with financial management and creating organized systems and procedures. She specializes in bookkeeping, accounting, QuickBooks solutions, small business tax issues and consulting.

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