There's nothing like a good side hustle! If you're doing it right, you're adding value to your life and earning a little supplemental income in the process. The reality is, the more you make, the more you may want to ask yourself if you're running a side hustle or a business. If you're taking on clients and bringing in an increased amount of revenue, it might be in your best interest to formalize the process and start treating your side hustle like a business. One of the biggest challenges for many entrepreneurs in the beginning stages of their business is managing cash flow. However, smart tactics and tools like business cards can help make the process run smoothly.
Get on top of managing cash flow now so you can convert and scale your side hustle if and when when you're ready to pursue something bigger.
1. Keep an eye on your finances.
Increasing cash flow is one of the many reasons people start a side hustle. I spoke with an entrepreneur who transitioned her love of event planning into a full-scale business. (She now handles multi-million dollar accounts and sells out venues.)
Yet behind the scenes she was barely making ends meet. She was cutting checks to vendors from her personal account and paying bills as she went instead of making use of financial tools like business cards or a business line of credit to better manage her cash flow. Ultimately, instead of reveling in the success of her business, stagnated cash flow left her living from gig to gig.
This financial bind is not uncommon. Learning early on to separate your business and personal accounts can save you a lot of time, money and heartache in the future. Having an established relationship with a financial institution can also help if you ever decide to grow your business. Scaling may require additional working capital. Access to new credit such as business charge or credit cards can help you manage cash flow while you establish your side hustle.
2. Get a sharp accountant or bookkeeper.
Bookkeeping is essential for all businesses and side hustles. Without it, you may find yourself losing money or, worse, in trouble with the Internal Revenue Service (IRS).
Your side hustle should be a labor of love that eventually pays dividends. Managing cash flow is essential to its health and success.
A bookkeeper will ensure that you're categorizing all of your income and expenses and managing your business card accounts—all steps that are required by the IRS. An accountant will ensure that you're paying your taxes on time, provide you with financial reports that show the health of your business and notify you of trends before they become an issue.
Managing cash flow successfully requires that you know how you're doing financially. To do so, you want to set clear financial goals and review accounting reports often to have a thorough understanding of what's coming in and what's going out. This is especially important if you rely on the income from your side hustle. Having a firm grasp of your books can help you plan ahead.
Hiring an accountant that you trust is imperative. Another entrepreneur I spoke to had a great plan and service but an inexperienced financial accountant. As her side hustle scaled, her accountant was not able to manage the evolving needs of a growing business. As a result, she struggled to manage cash flow, which stalled progress on her side hustle.
Having a seasoned team or a sharp accountant in place to support your financial needs as you scale your side hustle is a huge asset. Their knowledge can help you make sound financial decisions and even provide creative solutions to better cash flow management. Rely on their expertise instead of remaining in the dark about how to best handle the bookkeeping for your side hustle.
3. Pay attention to your revenue and expenses.
There is a difference between nurturing a side project or hobby and working a side hustle. It is okay to splurge on an activity that brings you joy. However, developing a “hustle," implies that you are using your skills to earn some extra cash, not add an expense.
Managing cash flow well means assessing the real cost of the product or service you are providing and ensuring that you are actually generating revenue instead of just funding a hobby.
You may have some necessary expenses up front to convert your side hustle into a business such as incorporation fees, accounting services, etc. These expenses may seem steep in the beginning but they are actually investments in your future success. Finding creative financial solutions, knowing when to spend, when to use business cards and when to save is key to managing your cash flow.
Your side hustle should be a labor of love that eventually pays dividends. Managing cash flow is essential to its health and success. If you take the time now to build an experienced team and utilize smart financial tools, you can set your side hustle up to become the sustainable business it has the potential to be.
Read more articles on managing money.
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