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What To Do When You're Self-Employed and Out of Money

Self-Employed and Out of Money

It is great being your own boss but... what happens when you have a cash flow other words...when you are out of money?  The problem is you don't always know when money is coming in while you have bills due every month both for your business and personal life.  So you plan and you save but that only takes you so far.  It happens, and what do you do when you're out of money?


As a self-employed person you have options.  You could borrow money which is why it is good to have a business line of credit if you can get one.  You can also borrow money from relatives, friends, or business contacts that trust you.  If you have regular credit card receipts you may be able to borrow against those.  Another option might be borrowing against your accounts receivable.

How else can you generate cash?  You can work your accounts receivable and collect what you can. You can negotiate with customers/clients to pay you in advance perhaps in return for something like a guarantee not to raise your prices for them for a certain amount of time. Consider this too, if you are close to year-end some of your customers might actually want to pay you ahead of time to reduce their taxable income and thus their taxes for this year.

Finally, on the cost side you can speak with vendors you owe and explain the situation and ask for more time to pay them.  The key with delaying payments or getting paid ahead of time is communication.  Being quiet about the situation is the worse thing you can do.  People you have done business with and know you are likely to want to help you out.  

If you owe a lot of money and can't make a payment you may need to exchange your debts for an equity position in your business.  Stop and think about options that you do have and consider what you have of value that you can use to get you through this moment.  The way you handle this situation may actually help you to develop a reputation as a person with gumption and stick-to-itiveness.

So yes plan ahead, watch your spending, and save to build a reserve when you start your business are all good ideas.  But when your out of money you also have options.  Like anything else in your business you can overcome this hurdle.  Do not quickly throw in the towel but rise to the occasion.

While I addressed several ways to deal with being out of money I would like to learn of other options too.  If you have ideas email me at  If one of us succeeds we all succeed.

The CPA Superhero wants to help you to succeed in business, life, and in retirement.  I prepare income tax returns and I help clients with their businesses and financial goals. Contact me using my information below to schedule a free introductory consultation up to a half hour. 

Jeff Haywood, CPA

The CPA Superhero

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My posts contain general information that does not fit every situation, they are not all inclusive, and as always for your tax situation everything "depends on facts and circumstances."  In addition, the information/IRS requirements are always subject to change.  So call me to talk about your specific facts and circumstances and what you want to accomplish.

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