When you are self-employed or run a home-based business, it is vital that you have a business plan that outlines your goals and financial information.
Unfortunately, statistics show that many home-based businesses often fail due to poor financial planning. Therefore, for small business owners should not only develop a financial plan, but also consider developing a method for managing their personal financial situation as well.
Here are some things to consider including in a business’s financial plan:
Don’t underestimate expenses
There are many costs associated with running a business, so it is important not to forget to include expenses like insurance or childcare (if you have children that may need babysitting while you work) in your spending plan.
Keep accurate records
Those who are self-employed should keep copies of all receipts for tax time and ensure they complete all of their paperwork on time, particularly if they are billing customers.
Manage your income
When your income varies each month, determine your average monthly income. Then if you happen to earn more than average, you can put the extra amount into a savings fund to supplement less profitable months.
Avoid relying on credit cards
Borrowing from a credit card is rarely a good idea. Instead, if you need to use a credit card for business expenses, open an account specifically for that purpose.
Keep tabs on your taxes
To avoid surprises at tax-time, regularly review your taxes throughout the year. Don’t forget to make necessary quarterly tax payments to avoid expensive penalties.