The Joys of Managing Cash Flow when You Have a Home Business

When running a home business, managing cash flow can be a real challenge.

I have enough money to cover all my bills this month. However, I managed to let things get a little off, and I ended up with an overdraft in my primary checking account. Mainly because I was thinking more in terms of straight up: Here’s how much I’m getting this month/here are my expenses. That’s great that I have enough to balance out at the end of the month. What I don’t have, though, is quite enough right now.

I forgot to take into account the timing of when I receive my money. It’s more about cash flow at this point than it is actual cash.

Pay Attention to Cash Flow

When you run a home business, you have to realize that money doesn’t always arrive right when you would like it to. Here are some of the things you have to keep in mind as you plan out your home business income for the month:

  • Sometimes, clients pay late.
  • If you accept PayPal, it can take 3 to 4 business days to receive your funds.
  • Your bank might only credit the first $100 of a check to your account immediately, and hold the rest until another day.
  • The order of your transactions may not matter. Some banks actually maximize overdraft fees by taking out all of the debits first, and only adding the credits at the end.
  • Your automatic debits are coming out no matter what.

My finances are mostly automated, and that makes a bit of a difference. It’s all — retirement account contribution, transfer to the emergency fund, mortgage payment, car loan obligation — coming out, on the appropriate date, no matter what. Some of my clients were (are still) a little late paying. I switched to Freshbooks for invoicing to save money, but it adds another few days to the process of getting money in my bank account (although that is normally accounted for).  The real kicker, though, is that a clerical error means that my husband’s pay for one of his summer classes has been delayed a pay period.

But, instead of paying attention to how that affected the overall picture, I just kept moving along, business as usual. A slight adjustment to the timing of one of the checks I wrote (for tithing, no less!) would have helped me avoid this entire situation. However, I wasn’t paying that much attention to my cash flow. And it came back to bite me.

The money’s coming. It will be there Monday — once it makes over from PayPal. But that doesn’t help me now. Nor does it make me feel better about the overdraft. Especially since it could have easily been prevented. I feel extremely stupid.

Having a home business presents challenges to managing cash flow that you don’t see when you’re a salaried employee. The money isn’t always there at the same time month after month. When you are living on variable income, it’s vital that you pay attention not just too how much you expect, but when it will actually be there. I should have built up a better cushion in my checking account, and paid better attention to how the timing was going to work out; cash flow is just as important as how much money you have.

Image source: Revisorweb via Wikimedia Commons

Written by Miranda Marquit

Miranda Marquit is a freelance writer and professional blogger, specializing in personal finance, small business, and investing topics. She writes for a number of financial web sites and blogs, and has been featured in numerous media. Read about life as a freelancer at and in her book Confessions of a Professional Blogger.

4 Responses to The Joys of Managing Cash Flow when You Have a Home Business

  1. Oh man. I feel your pain. I’ve got a late paying client this month that is hurting cash flow bad.

    Talk about embarrassing, this summer I bounced a tithe check to the church I teach FPU at because of a random bank hold on a large deposit. That was an awkward email to write to the church.

    • Oooh. Ouch. Nothing of mine has bounced yet (cross fingers) and I should be good until Monday. It’s kind of a pain, though, when you know that the money is out there, in the ether, but it just hasn’t finished going through the ACH process. With our technology, you’d think they could update it and make it virtually instant.

  2. Great point about paying attention to how cash flow affects the overall financial picture. If you are going to be in business for yourself you better learn to manage the nuances of the cash (and customer’s paying behavior) that is coming and going.

    • That’s so true. It’s been a while since I’ve messed up this badly, and the experience has done a lot for shaking me out of my complacency.

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