Each year, more people are starting a side hustle to bolster their income to pay for their next vacation, get out of debt or pursue their goal of owning a business. I started with my blogging hustle out of a hobby. When the hobby stated giving monetary return I became more serious and more dedicated.
As the internet has made starting a business easy, lots of side hustle entrepreneurs find themselves moving to a full-blown business with a little or no idea how to handle the finances. Here are some tips for learning to manage the money that comes in through your side hustle efforts.
Take Time to Read About Small Business Finance
You don’t have to be an expert accountant to manage your side hustle funds unless your side hustle is accounting!
You should, however, take it upon yourself to learn more about small business finances. Read to learn about revenue vs. sales and understand the difference.
Use the many resources available online to learn about what’s expected of you during tax season, invoicing strategies for quick payment, and how to create standard operating procedures to work smarter, not harder.
If you still feel lost, look to your local community college or Chamber of Commerce and see what courses are available to help you learn more about small business finance.
Pro tip: these courses are usually a legitimate business expense that you can claim for tax season.
Track Your Income and Expenses
Use a basic Profit and Loss (P&L) template to track how much money you generate in your side hustle and how much you spend to keep it operational.
Ideally, you’ll want to keep your P&L up to date on a monthly basis. It doesn’t need to be fancy – an Excel sheet with a tab for each month is sufficient.
By calculating the money you’ve made versus the money you’ve spent, you’ll be able to identify if your side hustle is profitable.
Your P&L will be a valuable tool at tax time. That’s why setting aside time each month to update it is preferable and will save you lots of stress down the road.
Be sure to capture everything, down to the pens you purchase. Understanding and tracking expenses are crucial for long-term success.
Re-Invest Without Acquiring Debt
A side hustle isn’t meant to be a significant financial undertaking. Set a budget for starting out (preferably no more than a couple hundred dollars) and stick to it.
It’s important to be frugal when starting a side hustle or you may find yourself further away from financial freedom than when you started.
On the other hand, it’s important to be frugal without being cheap. Put some of the money you make in your side hustle back into the business.
Perhaps after your first client, you’ll be able to spend money on a nice logo. After your 20th client, you might be able to invest in a branding and graphic design package.
Reinvesting in your business will help you scale up and become more successful.
Know When to Outsource
Outsourcing is one of the ways to reinvest in your business in a way that makes sense. If you have a limited understanding of small business finance, outsourcing to a bookkeeper or accounting consultant is ideal.
Additionally, you may choose to outsource some of the minor marketing efforts out to another side hustler so that you can focus on your tasks.
If you lack the marketing skills, hire an online marketer, social networker. If you think you do not have much time to see the website’s technical issues, there are plenty of pros available for hiring on-demand.
Optimize Your Invoicing
The sooner you get your invoices to your customers, the quicker you’ll be paid. Depending on the service you offer and the structure of your business, you may choose to take a prepaid approach. For example, a jewelry maker selling on Etsy receives payment before shipping the product.
I still operate with PayPal based invoicing sometimes I do need to issue custom invoices and for that, I use google docs for creating my invoices. I did pay initially to create my invoice template though through a professional designer.
However, if you offer a service such as a dog walking or social media management, having a strong invoice template and staying on top of your invoicing efforts will ultimately improve your cash flow.
Managing your side hustle finances shouldn’t be a full-time job. By tracking your expenses and income, and dedicating time to expanding your knowledge, you’ll get to your financial goals in no time.