As a sole trader, you often have a lot more flexibility in your life. As, with no boss to answer to, you are free to choose your own working hours as well as choosing what work you take on. Sounds wonderful, right? Well there is one, very large, downside to being a sole trader – you have to be wholly in charge of your finances. This not only includes your taxes and business expenses, but also any unexpected costs you might come across as a sole trader.
Now, before you dismiss the idea of being a sole trade due to fear of financial stability, here are some top tips to help you manage your finances and be your own boss:
Just because you’re working for yourself, it doesn’t mean you should shoulder all the stress of doing your finances. Just think, if you worked in an office for a company, it wouldn’t be your boss that sorted all the finances – no, it would be someone like an accountant, who is an expert in these matters. So, never feel too proud or nervous to ask for help, there are plenty of accountancy or financial firms out there that are dedicated to helping sole traders. Not only will this save you time, but you may save money too, as your accountant can show you areas where you could be paying too much tax.
As tempting as it is, just because you see money coming in from your business, you shouldn’t go wild and spend it all. That’s because, as lovely as that vacation might be, you never know when a month might come along where you make less money. So, as a sole trader, you should always have a contingency fund with money to help pay your bills when the worst might happen.
To know how much money to save, make a excel sheet that has both your monthly expenses as well as your current work flow and the money that will bring. You can then aim to have at least 2 or 3 months available in money to keep you afloat. Plus, by having your workflow and pay, you’ll see the amount of work you’ll need to source if one client or customer stops using your services.
For many sole traders, you’ll find yourself paying too much tax and not expensing enough of your business costs. Here hiring help from a financial expert can really help, but there are a number of ways you can make your life easier when it comes to your expenses.
For one, always keep your receipts in a safe place, as if you don’t have evidence for things like your business gas money, you won’t be able to claim. It’s also important that you keep on top of your expenses, making sure you update your spreadsheet every few weeks. This is especially important when you consider, that after a month or so, you might forget a few expenses that you could have claimed.
Being in charge of your own finances as a sole trader can be a scary prospect. However, with some helpful advice and some careful planning, you can ensure your money is always in order.