How to make a financial plan as an entrepreneur

When you have uneven income, financial planning can feel daunting. Here's how to make it easy

Get a line of credit (LOC):

Next, think about obtaining a line of credit. This isn’t to carry a balance, but instead to smooth out month-to-month cash flow.  For example, paying a bill that is due before you receive payment from a client.

Add a line of credit to smooth out the rough times

Unfortunately, though, if the business is new you may have to secure the line of credit with your own assets or personal credit. Once the business gets more established, an unsecured line of credit will be easier to obtain.

If you’re unsure about how to obtain a line of credit, here’s a few simple steps:

  • Visit your bank, credit union or other lending institutions such as BDO
  • Provide them with details including income history, tax returns, credit history, etc.
  • Determine the use and spending limits for your LOC
  • Once approved make sure you’re being diligent with your payments and only spending within your requirements

Have your accounts receivable in order:

Remember that money owed to you is not money owned by you.

It’s always good practice to make sure that your accounts receivable are up to date, while keeping in mind that not every client of yours will make their payments on time. Make a habit of running through the numbers and books daily (or weekly, if your business isn’t selling things daily).

It’s important to keep track of payables and receivables while managing your invoices. The process should be systematic to the point it runs like clockwork. Tips to follow include:

Just cause someone owes you money doesn't mean your financial plan is set
  • Set specific parameters concerning payment schedules – and include payment terms in contracts
  • Create internal timetables and guidelines regarding when you should follow up with clients that are late on payments
  • Establish clear penalties for late payments and put them in your contracts so everyone is on the same page

Getting in control of this process will give you a huge feeling of relief and give you a lot more confidence about the company’s books.

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