One of the biggest challenges in a home business is managing the cash flow. Cash flow being the movement of money that is coming in and money that is going out. How you are earning that money and how that money is being spent. When you start a home business, you not only have to keep an eye on your household’s cash flow, but also on how the income and expenses are working for your business.
Often, our home businesses have irregular income, unexpected expenses, and other factors that affect our ability to accurately predict our cash flow. This can be stressful and make it tough for us to feel successful in our work. Making a budget for the business is the best first step for getting a good understanding of your cash flow needs. Write down all of your regular expenses first–weekly, monthly, quarterly and annually. Then write down your current revenue streams–where the money for your home business is coming from. While it might be helpful to have an “ideal” budget, it is better to start with a realistic financial picture of the revenue and expenses in your business as they are TODAY.
With a budget, you will have a useful tool in evaluating how your spend your money and how you need to manage revenue. If you have quarterly or annual expenses due at a certain time, or if you have a seasonal business with a big influx of revenue only in certain times of the year, you can plan for how to work with that reality.
Another key to establishing a workable and positive cash flow situation is to build up some reserves. Having money in investments or reserves can help you to save up for big expenses and tide yourself over when there is a dip in revenue for the business.
See Also: Should You Tithe or Give From Your Home Business? and Keeping Track of Business Expenses