Small business owners and self-employed professionals often have to be their very own jack-of-all-trades. It’s ultimately up to you to manage almost every aspect of your business, which can be demanding yet incredibly rewarding.
Finances are a crucial aspect of self-employment because you don’t have the security and stability of an employed position.
Without a grip on your business finances, your operation can quickly become untenable and you may be forced to look elsewhere for more reliable income. Fortunately, you can manage your finances more effectively with these handy tips.
Keep your personal and business accounts separate
One of the worst mistakes newly self-employed people make is to combine personal and business finances. Sole traders aren’t legally required to split their accounts, but it’s recommended to give you better visibility over your finances.
With a separate business account, you can track spending, income and cash flow much more easily. Come self-assessment time, your records will be a lot easier to trawl through because you won’t have to tell the difference between personal and business spending.
Optimise your accounting methods
Tracking your income and expenditure can be done in a variety of ways. However, it’s always best to have a reliable method of recording income and expenditure so you don’t have so much work to do down the line.
You can rely on dedicated accounting software services to make it easier for you or find your own way of tracking finances. If you opt for the latter, make sure you back up your files in the cloud so you don’t risk losing everything accidentally.
Look for additional investment
Investing in your operations can be challenging as a self-employed business owner. Funds often have to come from your pocket, which is risky because you’re liable for any losses you suffer.
Finding external investment can be a good idea if you’re confident of being able to return on the investment. Alternatively, you could try to secure a loan for self-employed business owners to help you develop your venture.
Stay on top of your cash flow
Cash flow is vitally important for small and large businesses alike, and it’s probably even more important for a self-employed individual like yourself.
When you’re responsible for generating your income, any delays or missed payments can disrupt your ability to pay your personal bills as well as cover your business expenses.
Chasing payments and being vigilant with customer invoicing is important to ensure that you’re maintaining a steady flow of income. If business dries up, try to find new ways to keep things ticking over so you can avoid dipping into savings or relying on credit.
