While entrepreneurship can be exciting and incredibly fulfilling, it’s not always as glamorous as many people assume it to be. As a solo entrepreneur myself, I know that self-employment can be stressful and time-consuming. I have to take on most of the responsibilities of the business myself, as I don’t have an accounting team or administrative assistant to balance my books or follow up on invoices from clients.
And I’m not the only one who deals with these struggles – according to a new survey by Interac Corp., 71 per cent of Canadian entrepreneurs are busy chasing payments because they’re not getting paid on time.
Following up with clients for late payments can put you in between a rock and a hard place. It often feels awkward and uncomfortable, especially when those payments are months overdue and you’re trying to remain professional (I once had to follow-up with a client for six months for a significant amount of money before getting paid!). Besides being an annoyance, following up on invoices leaves me with less time to focus on my business and actually grow it.
So if you’re a first-time entrepreneur, here are some of my own money management tips to help you stay afloat throughout your career:
- Build a business savings account. Self-employment can mean no longer having a steady cashflow. Some months can be better than others, so it’s important to create a savings account that you can regularly contribute to. This small step helps to ensure that your business can continue running if you have an emergency or a client is late with payment. I recommend saving three months worth of operational costs.
- Streamline your client invoicing. To help manage cashflow, make sure that you’re requesting payment from clients up front or at least a 50% deposit (with the remainder paid 30 days upon completion of the project). Interac e-Transfer Request Money can better help streamline this process to ensure clients pay their amount owing on time so you get the funds immediately, versus waiting for a cheque to be mailed or cleared by your financial institution.
- Prepare for tax season. Tax season can be an especially stressful time for business owners, even more so if you haven’t saved enough money throughout the year. Make sure you’re setting aside a portion of revenue from each client payment for any taxes or HST owed. Most importantly, do not touch this money!
- Keep the income coming. Where possible, regulate your income stream. Having a few clients on a retainer will give you a better idea of the minimum amount coming in each month and allow you to create a bit of a structure to cover your overhead.