Insureon Blog

4 Risks from Irregular Income (and How to Beat Them)

28. August 2015 07:45

piggy bank

For many small-business owners – especially entrepreneurs who are just starting out – cash flow is more unpredictable than Midwest weather. One day, it's a downpour of clients and new business. Next week, a severe work drought.

Though it's hard to budget and plan without knowing what's coming down the pike, you have a lot at stake if you don't properly manage your income. Let's take a look at some of the risks you're up against and how to minimize unnecessary monetary setbacks.

1. Missing quarterly taxes.

Being your own boss has many perks, but paying the full portion of your Social Security and Medicare taxes is not one of them. Employees get a break on that front because employers pay half of these taxes. But you must pay the full 15.3 percent of your income for this self-employment tax.

And the rub doesn't end there. You must pay these estimated taxes each quarter. Payments are due…

If you miss these deadlines, you may be penalized for underpaying your estimated taxes when you file your return in April.

Because you may not know how much money you'll make for the year, look at what you made last year and use that number as the basis for your estimate. If you just started your business, take a look at your quarterly earnings instead.

Set calendar reminders now for your quarterly tax due dates so you don't miss the deadlines. To learn more about your tax obligations, read "Did You Freelance This Year? Now Is the Time to Focus on Small Business Taxes."

2. Not having enough money for the bills.

The scramble to pay your bills during a lean month can be especially nerve wracking. Nothing burns through a modest nest egg quicker than month-to-month living expenses.

You can make these expenses a little more manageable by:

To learn more about insurance payment options, read "Decoding Your Small Business Insurance Quotes."

3. Getting stuck in the feast-or-famine cycle.

This isn't entirely within your realm of control. You can't force clients to do business with you, but you can make sure you spend time every day trying to find new prospects. Though your days are already packed to the brim, make sure you carve out a little time to:

For more tips on drumming up buzz and business, check out "Make a Better Impression on 88% of Your Potential Clients."

4. Dipping into the business well.

Mixing your personal and business income is a surefire way to complicate your bookkeeping and tax records. To minimize the temptation to spend your business revenue with impunity, be sure to:

There may be times when you need to pay yourself a little extra, but establishing a limit can help curb frivolous spending.

For more penny-pinching pointers, check out our insurance savings blog series.


Contractors | Freelancers | General | Small Business | Small Business Risk Management | Tips for All Small Businesses

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