Don’t let the pressures of being in business for yourself bog you down. Strategise carefully to manage your business finances.
by The Editors | editor@themetrognome.in
Nobody expects business to be an easy affair to handle, but some people make a difficult task impossible by reckless and foolish behaviour. You can’t predict when your next big contract will be signed or when you can announce that you are breaking even, but with the help of cautious spending and common sense habits, self-employed persons can make sufficient money out of their work to lead quite comfortable lives.
Make a list of all expenses. Since your business is going to pay for your household expenses, you need to have a clear idea of what your home expenses are every month, and the times they are likely to increase (like in the case of a family wedding coming up in a few months, or fees for a new course for your child). Once this list is made, preferably with a month-by-month projection, you will be in a better position to devote a minimum percentage of your income to the home. Keep this sum of money fixed till such time inflation or necessary expenses necessitate reallocating more money.
Minimise overheads and expenses. If you are finding the going tough on the business front, causing stress at home, you might consider scaling down your operations, at least for a little while. If you can make do with three full-time staff instead of five, relieve the extra staff and save on their salary. You might even cut down your own salary for a while. Also, make sure that there are no wasteful expenses taking place in the office – air conditioners being left on when nobody is there, printouts being taken repeatedly when only once will suffice, employees leaving computers on even after they leave office, etc. All of these unnecessary expenses can be easily done away with by careful monitoring.
Accept that there will not be fixed income. Being a self-employed professional, whether on a freelance or a business basis, means that your income will be different every month. Some months will be a financial windfall, while others will be very lean. For the times when money is low, anticipate the reduction in business much before you hit a troublesome patch, and set aside funds to help you keep the office running even when there is no business. Business or not, you still have to shell out money for salaries, overhead, water and electricity, etc. so be on the guard before trouble actually comes knocking.
Never make the home finance the business. A mistake that most businesses in the red make is to use up all their assets to keep the office running. They forget why they went into business in the first place – to give a comfortable life to themselves and their families. Hence, the ideal business model is one in which the money flow is one way: from office to home, and never the reverse. People make the mistake of selling off personal assets like jewellery or mortgaging their homes to raise money. Still others take heavy loans against property and insurance policies, hoping to replace all the sold or borrowed assets when money comes later. Your office and home and two separate entities, so you cannot use your home to fund your office.
Invest wisely. You will need to secure your and your family’s life by timely investment in suitable insurance policies, equity bonds, mutual funds, etc. However, don’t opt for the first savings instrument you come across. Take professional help in planning for your family and your business. Your accountant will tell you how much income you will lose by way of paying taxes based on a projection of your business, so make sure you set aside this sum months in advance. Also, your spending should be the same, irrespective of how much money your business gives you. Never be tempted to splurge recklessly when you have surplus funds on hand.
(Picture courtesy www.wordlypost.in. Image is used for representational purpose only)