Running your own business is tough but it can also be hugely rewarding. As a sole trader, you’re always going to have multiple things going on at once, but one of the most vital things to running your business is being able to manage cashflow – who owes you money and who you need to pay. Below are some top tips to help you master all things money management and allowing you to focus on what you do best.
Keep a cash flow forecast
Set targets for the next six to 12 months to keep track of finances and to avoid any shortfalls. The most basic way to set up a cash flow forecast is to keep a simple spreadsheet listing income and costs on a monthly basis. Take note of any seasonal variations – for example, heating bills will probably go up during winter. Factor in fixed and variable costs to your cash flow forecast and be realistic – include every item.
Keep on top of payments
Make sure you keep a track of owed payments. Unfortunately chasing payments can take a big chunk of time if you are self-employed, however, you can turn to using your phone and the latest apps for help. Look for apps such as Circle (free), an easy way to pay and get paid instantly. All you have to do to get started is download the free app and link your debit card. You can then send or request money using just your contact’s mobile number or email address. You can also message within the app, a simple way to chat about jobs and appointments. It’s free to transfer between GBP, EUR and USD, so if you’ve business abroad, it’s a great option for that too.
With Small Business Pro you can save over £30 a month. Small Business Pro will help with the heavy lifting of managing customers, taking payments, insurance, finance and HR, plus you’ll get a host of personal wellbeing benefits.
You can find out more here.
Don’t forget VAT
Even as a sole trader, you will still be obliged to register for VAT if your turnover exceeds the threshold. Some business owners opt to register voluntarily though.
Self-assessment
This can seem like a daunting task – and, indeed, it is one of the most important legal responsibilities facing self-employed people. You have a legal responsibility to keep accurate accounts anyway, but this is what will help you the most when you complete your annual self-assessment tax return.
Invoice promptly
Accounts and bookkeeping are the twin banes of every sole trader’s life. They are a hassle, and they distract you from doing what it is that you are actually good at. Unfortunately, these activities are fundamental to the running of your business. Luckily, there is an increasing number of affordable, easy-to-use accounting packages on the market. Many of these are ‘software as a service’ applications, meaning they run online and you can access them from anywhere with an internet connection. The likes of Clear Books, Kashflow and Free Agent are all useful.
Stay friendly with lenders
Many businesses need a cash boost from a bank or lender every now and then, particularly when they’re starting out, and might need credit or an overdraft to get up and running. It’s therefore important to stay on good terms with them and keep them informed of any unforeseen outgoings or changes in forecasts. By developing a good relationship with banks and lenders that is based on trust, they’ll be more likely to treat you favourably should your business need future financial assistance
Keep things simple
When you’re busy, keeping track of expenses is not top of the to-do list! However, this will save time in the long-run and there are ways to make it simple, for example, recording daily outgoings via your smartphone. Search expenses on the Apple store or Google Play and you’ll come across free apps such as iClaimIt that can keep track of mileage or other expenses.
Savvy money management
Starting a business can result in high initial outlay, so keep on top of the latest bank accounts, credit cards, utility offers and more by subscribing to money saving emails from websites such as MoneySavingExpert – over seven million people receive their newsletter each week! Whether it’s furniture for the new office or phones for you and the staff, take a look at apps and websites such as VoucherCodes or Comparethemarket that can get you some great deals and ways to save money on business expenses.
Anticipate problems
Finally, it’s imperative that you identify any cash flow problems early on by making sure you constantly update your cash flow forecast. Don’t bury your head in the sand and hope the issue will go away. By keeping on top of your cash flow you’ll be able to deal with problems quickly and efficiently.
The above should to help you manage your business finances more easily and enable you to focus on providing a great service to your customers.
Further reading on managing finances
