Side Hustle Cash Flow: 7 Steps to Get Paid Sooner

1. Keep your side-hustle money apart from your personal money

Job invoice: paid within ten days, not thirty, for a 2% discount. Number one brings cash in fastest, up to twenty days sooner. Number seven: keep your side-hustle money apart from your personal money. Separating personal and business money makes accounting simpler, one guide says.

Recording the two apart can save time and money at tax time, another adds. On your own, you don't need a business bank account, one guide says. Still, that guide calls it a good idea, and another says it's better. That way, business and personal transactions are easy to tell apart, including cash you take out.

A business account makes three things easier, one portal says: tracking, controlling and showing your business money apart. One small business agency says to get one as soon as you take or spend business money. Deposit all your daily receipts into that account and use it for business only, one tax agency says. Note the source of each deposit and the type of each expense.

If one account serves both, another guide says to clearly mark every personal payment in your cash book. One tax agency's deposit slip example, in its own dollars, lists three deposits: 1,847, and 1,000. By our count, those three deposits add up to 2,847. If practical guides like this help you, subscribe.

Every step and rule in this video comes straight from the official guide pages linked below.

2. Record all the money that comes in and goes out

Number six: record all the money that comes in and goes out. Keep records of all sales and income, and all business expenses, one tax agency's page says. Another guide's list of business expenses includes cash purchases. Keep every receipt and invoice you get, and copies of every invoice you send, one portal says.

You may choose any record system that clearly shows your income and expenses, one tax agency says. It adds that, in most cases, its law asks for no special kind of record. One portal names three digital options: accounting software, web-based systems and spreadsheets. A cash book, another guide explains, is simply a record of all payments.

Record expenses when they happen and note the source of every receipt, one tax agency's guide says. Generally, it adds, it's best to record transactions every day. For a small business starting out, it describes a simple system: a daily summary of cash receipts, then monthly summaries. Its example day has $263 sixty of cash sales and $4 twenty of sales tax.

By our count, that day's receipts come to $267 eighty. One guide says to keep records five years, another six, and a third seven, so check your own rule. Number five: know your profit from your cash, because the two can differ.

3. Know your profit from your cash

Net profit is the money left after paying expenses, one portal says: sales minus expenses. A profit and loss statement lists your sales and expenses and shows how much profit you're making. A cash flow statement tracks all the money flowing in and out of your business, the same portal says. Money coming in isn't only sales, another guide notes; it also includes cash from loans or from selling business assets.

In one public business bank's example, a sale of $100,000 at a 20% profit margin can look great. Yet the bank account can show minus $70,000 until that money is collected. By our count, 20% of that sale is $20,000 of profit on paper, still to be collected. A $200 sale in January, paid in February, counts in February under the cash method, one small business agency explains.

A different method would record it in January, when the sale is made. One tax agency's cash basis records income or expenses only when you receive money or pay a bill. In its example, money invoiced in March but paid in April counts in April. That gap between a sale and its cash is what the next step plans for.

4. Forecast your cash month by month

Number four: forecast your cash month by month, before it comes in and goes out. A cash flow forecast estimates future sales and costs, one portal says, to see if income will cover them. It helps you prevent cash shortages and avoid debt, that portal adds. One guide forecasts the next twelve months, and another says six months to a year.

A forecast shows when you may have extra funds or a shortage, so you can plan for both, the first says. For day-to-day business, one guide says to forecast daily or weekly. Start with an opening balance: the money in your bank in the first month, then last month's closing balance. The closing balance is that opening balance plus the money coming in, minus the money going out.

One official tool's example month has 17,000 coming in and 14,944 going out. By our count, that leaves 2,056 of cash flow for the month. That guide also says to list and date the cash you expect, like sales and invoices paid to you. Then list and date what goes out, including less regular costs like taxes and repairs.

One public business bank adds the big purchases you expect to the monthly list. Look at previous years and seasonal trends to forecast what comes in, one portal says. Another guide suggests three versions of your income: pessimistic, realistic and optimistic. Base the figures on your bank: when customers pay, not when you send the invoice.

Our earlier guide, seven steps to start a business, is linked on screen. Halfway there: four steps done, with your money apart, recorded, understood and forecast.

5. Set money aside for tax and regular bills as each payment comes in

Number three: set money aside for tax and regular bills as each payment comes in. Start putting money aside for your tax bill as soon as income starts coming in, one guide says. Another guide says to put a portion of each payment into a separate account. Then take that money out in time to pay what's due.

As for how much, that guide quotes some experts who suggest at least 20% of income. No tax agency page we read gives one share of income to put aside, so ask your own tax office. A tax agency's guide says to move money across through the year to cover large bills. If you charge a sales tax, one tax agency suggests working it out on each dollar earned and setting it aside regularly.

One tax agency says that if you're in business for yourself, you generally make tax payments during the year. That agency lets you pay weekly, every two weeks or monthly, if enough is paid each quarter. Prepaying tax in instalments helps smooth out your cash flow and avoid a large tax bill, another tax agency says. In one more agency's system, each payment during the year covers half of last year's tax.

Its example is a bill of 3,000, in its own currency, with two payments of 900 already made. By our count, 3,000 minus 1,800 already paid leaves 1,200 still to pay. Setting money aside regularly means funds are ready when tax payments are due, one portal says. Rules and rates differ where you live, so your own tax office's guide is the one that counts.

6. Keep a cash cushion

Number two: keep a cash cushion, and check your real numbers against the plan. Keeping a reserve of cash may reduce risks as you get started, one government guide says. If you plan to grow, that guide adds, keep funds for unexpected as well as regular expenses. If your work has known quiet periods, plan to have enough cash to get through them, another says.

Good cash flow management helps you handle the unexpected, like a sudden change in the market, a third guide says. No guide we read gives a number of months for that cushion, so it's your call. Then the check: give your business a financial health check at least once a year, one portal says. That portal also suggests checking spending against the budget every month, and updating the forecast monthly or quarterly.

Its example budgets $5,000 for a quarter, and 4,500 is spent after two months. By our count, that's 90% of the budget with a month to go, so the plan gets adjusted. One tax agency's guide calls checking actual figures against your budget one of the most important ways to manage finances. At the end of each month, it says, enter the actual figures and mark the ones well over or under the forecast.

Then update the forecast for the months ahead as you go. Comparing actual and forecast figures helps prevent many problems before they happen, it says. So far: money apart, recorded, understood, forecast, set aside and cushioned.

7. Bring money in sooner

Number one: bring money in sooner, and send your own payments out on time. One public business bank's example offers 2% off if clients pay within ten days. Its terms ask for payment within thirty days, so the discount brings the money in sooner. By our count, paid within ten days instead of thirty, the cash can arrive up to twenty days sooner.

Collecting payments from customers faster frees up your cash, one portal says. Clear payment terms help you get paid on time and manage your cash flow, it adds. Say when you expect payment: all up front, in instalments, on delivery or after thirty days. Payment terms of thirty to ninety days are common, one government guide notes, so agree terms that suit you.

Invoice as soon as possible after the work, another guide says, while the customer remembers its value. Ask for deposits on special orders, and encourage early payment with discounts, the first portal suggests. If suppliers want payment in thirty days, that bank suggests thirty days for clients too. The first portal also suggests asking suppliers for sixty days instead of thirty, to hold onto cash longer.

If a payment is late, start with a polite reminder by phone or email, the same portal says. Some late payments happen because the customer forgot, and a calm approach can resolve it, it adds. For your own bills, set calendar reminders or schedule payments in advance, that portal adds. To recap: money apart, every payment recorded, profit and cash told apart, a forecast, money set aside, a cushion, and money in sooner.

A small first step: list one month of money in and out, with dates. Each example here is one guide's own, so your numbers will be your own. Rules, rates and currencies differ where you live, so check your own government's business guides. Which step will you set up first?

Tell us in the comments. Subscribe to see the next official guides we check. Your next step is in the video on screen now: nine official steps to start a business from home. Information only; results vary.

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