But I’m not so crazy about the administrative, record keeping and money management tasks that are part of the picture. I’d much rather devote time to the actual work I enjoy doing.
The reality is that any entrepreneur – gig or otherwise – needs a back office of some sort. January is an ideal month to look at where you are and make adjustments for the year to come. Consider these five tips to get the money side of your business in good shape:
1) Find a good accountant. This advice came from just about every 40-and-older entrepreneur I interviewed for my book. It isn’t enough to locate someone who can prepare financial statements, however. A “good” accountant is someone who understands your business and gives you a strong comfort level. Trust your gut. It may take some digging and a few meetings to find the right person.
2) Set up systems. Think about how to accept payments (a good problem) and keep track of time, invoices and out-of-pocket expenses, among other things. These systems don’t have to be fancy. I use Excel spreadsheets to log hours and make notes. Bruce Summers, a Northern Virginia-based personal historian and Collaboration/Community Practice Coach, uses a combination of methods. For his personal history gigs, he uses Flash drives, digital file folders and project boxes to store hard copies of photos, letters and other family mementos. For his collaboration work, he maintains chronological hard and digital file folders for each client or project, along with folders and subfolders for email. Says Summers: “I have multiple, concurrent projects for each consulting line so I have to stay organized.”
3) Pare expenses. Frugality can help you to weather erratic cash flow and lean times, which are inevitable parts of freelancing (especially at the beginning). Most gig entrepreneurs work in a home office, which saves money on rent and commuting. Others, like Summers, use coffee meetings and virtual conferencing as inexpensive ways to serve clients and develop new business. “I use professional membership discounts when possible,” says Summers, who also comparison shops to save money on office and telecommunications equipment. Bartering is another good way to control costs while obtaining coaching, writing or other valuable support.
4) Decide on pricing. What to charge for your services can be a tricky question. Price them too low and you may not make enough income, or be perceived as “cheap” in more ways than one. Price them too high and you may lose business to less expensive competitors. Contact trade associations in your industry for data and research competitors’ prices. Just keep in mind that location is a big factor in pricing. A freelancer in Manhattan or San Francisco may charge more than one in the Midwest, where the cost of living is often lower.
5) Avoid commingling business and personal funds. Have separate bank accounts for each. “The IRS frowns upon mixing the two because the potential for fraud is much greater,” says Astrid Reeves, owner of Astrid’s Bookkeeping Co. and Services, Inc. in Fairfax, Virginia. “If the money trail is not easily discernible, that does not make them happy. It raises a red flag.” If you must take money out of your business to cover personal expenses, write a check to yourself from your business account and deposit it into your personal account to create a clear paper trail, recommends Reeves.
Bonus tip: Check your credit report. Should you ever need a business loan from a lender, your financial history will be a factor that determines approval. Negative information may result in a loan denial or high borrowing rates. If you don’t know what’s in your report, head to www.annualcreditreport.com and request a copy. You can get one for free every 12 months from each of the three major credit bureaus (Equifax, Experian and TransUnion).
Any gig entrepreneur who wants to build a successful business has to pay attention to the financial side. This doesn’t have to bog you down, however. Follow tried-and-true steps, get good help and devote time each day to your back office. That way, you can manage your money, rather than your money managing you.