Regardless of whether you’re a freelancer or small business owner, it’s important to understand the basics of financial management in order to secure your financial future. The good news is that effective financial management isn’t rocket science – but it does require discipline and the right strategies. By incorporating the following money management and money-saving tips into your regular business routine, you can develop sound financial habits and achieve financial success.

Understand Your Finances

Before you can create an effective financial management strategy for your business, you need to understand your current finances. To do that, review your business’ current budget, cash flow, accounts receivable, accounts payable, and capital.

Then, to get a 360-degree view of your finances, itemize your expenses, calculate your profit and loss, and evaluate your business’ assets and liabilities. This exercise will give you insight into where your business’ money is going, and whether or not you’re able to manage your financial obligations.

Create a Budget

Make sure to allocate sufficient funds for each necessary expense in your business. A budget will help you manage your expenses and help keep you from overspending. To create an effective budget, consider your plans for the year and break it into monthly and quarterly chunks. Using the system of budgeting known as the “50/30/20” budget can help.

With this system, allocate 50% of your income to essential items and expenses (rent, utilities, debt, etc.). 30% goes to financial goals and discretionary expenses, and the final 20% of your budget should go toward savings.

Set Financial Goals

Your budget will be useless unless you’re also setting financial goals. What do you want to accomplish in the next three months, six months, or year? How much do you need to save to cover an emergency, purchase new equipment, go on vacation or retire?

Having measurable goals helps ensure you’re making progress toward a desired outcome. When creating goals, be sure to factor in how much time you’ll need to reach them. Consider speaking to a financial advisor to help you accurately calculate your financial goals and reach them faster.

Track Your Expenses

Part of financial management means tracking your expenses. Set aside time each week (or month) to evaluate your finances and see where you’re spending too much money. This will help you make adjustments and ensure you don’t have too much money earmarked for one area and none for another.

Also, take advantage of accounting software and apps. These can help you track your spending in real-time and quickly identify any potential overspending.

Create Multiple Streams of Income

Focus on creating multiple streams of income, not just one. By having multiple income streams, you can produce more revenue and add more sources of income to your business in the long run. Consider whether you can leverage relationships with existing clients or partners to secure additional projects and gain added income. Generating new revenue streams can also help your business stay afloat during leaner financial times.

Secure Your Finances with Insurance

As an independent professional, self-employed professional, or small business owner, you need to understand the value of insurance and the role it plays in financial management. Insurance is part of an effective financial plan because it protects your business and your employees in the event of a financial loss due to injury, illness, disaster, property damage and more.

Depending on the type of business you run, you may need to obtain business liability insurance, professional liability insurance, business interruption insurance, and/or other types of coverage. Research your options and consult with an insurance broker to assess the risks your business may face and secure the best coverage.

Decrease Costs

If you’re having difficulty generating enough income, you may want to focus on cutting costs. Businesses tend to incur costs in areas they don’t need. These include office supplies, business travel, external contractors, and more.

When budgeting, assess the cost-benefit of each expense to determine what’s essential and what you can do without. In addition, look for ways to improve efficiency. Invest in tools and technology that can help your business run more efficiently and reduce the cost of manual labor.

Seek Professional Advice

At times, it can be helpful to bring in an outside expert to help you with financial planning. Seek out a reliable and experienced financial advisor who can provide sound advice on different ways to manage your business’ finances. A financial advisor can also help you create an effective budget, setting and reaching financial goals, and reducing taxes.

Financial success is a process that requires self-discipline, goal setting, and a sound financial management plan. Implement these strategies into your business operations and you’ll be in a better position to reach your financial goals.