One of the most important things you will need to know when setting out on your own with your business is how to handle your finances. It is critical to start with a solid budgeting framework so that you can not only survive but also thrive in the long run. The most common reason for a business’s failure is that it runs out of cash and experiences cash flow problems.

If you are a solo business owner, take a look at some of these tips to help you manage your finances and keep on top.

Use accounting software – or pay an accountant

One thing that you do not want to mess up in any business, but particularly not if you are on your own is accounting. After all, if you get that wrong, you have no idea how much money is coming in and out of your business to make sensible business decisions, and you can end up getting into a complete mess. Either use accounting software – Wave and Quickbooks are good examples of easy-to-use accounting software, or better still, outsource the job to someone who knows exactly what they are doing. Sure, it might cost more in the short term but will save you cash and stress in the long term. 

Keep money aside for taxes

Putting your taxes into a savings account would guarantee that you have enough money to cover your tax bill, preventing you from being caught out and having to pay money you do not have. While you should still seek professional advice, putting about 30% of your income into your savings account should cover your tax bill and other mandatory payments. If you find yourself in a mess with your taxes, get some advice on tax debt relief. 

Keep personal and business finances separate

It is important to keep your personal and business funds apart. To avoid them being mixed up, you should open a business account as soon as you start your business. It will assist you in avoiding tax pitfalls, simplifying your accounting, and allowing you to keep track of your company’s cash flow.

Apply for business credit

It’s a good idea to build credit prior to needing it. You never know when you’ll need some assistance, and it’s far easier to have it on hand than to panic if you need a little extra cash. It also aids in the creation of your business credit score, so even if you don’t use it, it is beneficial.

Have an emergency fund set aside

Having an emergency fund of 6-12 months’ worth of expenses will help you deal with the unexpected if you do need to. Customers can pay late or unforeseen bills will arise from time to time, so having a backup plan may be advantageous.

This advice can hopefully assist you in managing your finances as a solo business owner. By getting off to a good start, you should be able to avoid major issues and make running your company much less difficult.