Do you ever notice how one day can flow into the next, as can the weeks/months/years if you’re not careful? If we’re not mindful, we can get into the drift and ‘check out’ as a slave to a routine and habits we’ve created that may at one time have worked for us but no longer do. As responsible adults who seek to go beyond ‘getting by’ and instead ‘thriving’ in our lives, it makes sense to stop and re-assess what’s working for us and what isn’t periodically. This applies to our own personal health and well being, and that of our business as well. I’ve been running my small business for nearly two decades now.
There are plenty of joys in running your own business — and I can tell you without a doubt that the most challenging aspect of it, in my experience, is managing cash flows and working capital. What do you do when clients make commitments (or suggest that they intend to), but either don’t come through as you had planned or are delayed (sometimes for extended periods)? What do you do when you complete a project with a client, but have come to rely on that income? What do you do when tax time rolls around (as it does each year like clockwork) – are you ready to pay the piper/IRS?
For as long as I’ve been running my business, I still have to surf the waves with all of the above scenarios. As challenging as cash flow constraints have been at times, I’ve never failed to make an estimated tax payment (or my year-end payment) to the IRS. This past April, for the first time ever, I got caught short — the tax bill was a big one, but I’d failed to make estimated tax payments in 2016, and the client I was expecting to come through well ahead of tax time failed to do so. Uh-oh!! I didn’t have a Plan B either!! Ultimately, I was able to take care of that payment, but was biting my nails the whole time until that got taken care of — including having a more stressful two weeks in Hawaii than I’d have liked —and I’ve decided I don’t ever want to wind up in that situation again.
The moral to this story is three-fold:
- It’s imperative that even when you have a full plate of clients, you must continue to prospect and keep your pipeline full.
- Seek to maintain at least six months and preferably a year of working capital on hand for cash flows year-round.
- Ensure you re-direct a healthy portion of your income into an account dedicated to paying your taxes, and make sure you pay estimated taxes each quarter to stay current and reduce your stress levels come April!!