Cashflow tips for the self-employed
“Minding your own business” takes on a whole new meaning when you’re self-employed. Not only do you have to get the job done every day, you're also managing all the behind-the-scenes tasks such as accounting, marketing, web design, admin, goal setting, and more.
To keep all the plates spinning you need cashflow, so we’ve compiled the top money saving tips to try when it comes to keeping your self-employment income steady.
Pay yourself a salary
If you’re not paying yourself a market-rate salary, you’re self-funding your small business – which ultimately means your business isn’t profitable even if you think it is. Chat to your accountant about ways you can implement a wage for your role, keeping in mind it may take some time to build up to a full salary.
Paying yourself a salary also keeps you in check if you’re not the most disciplined when it comes to profits. If your business has a great month, you won’t be inclined to withdraw the additional earnings; instead, you’ll have your set salary to take home, and the rest can be filtered back into the business.
Make sure your business is getting paid
Set up a process for managing the collection of your debtors, so you’re not left with money in accounts receivable. When payments first become overdue, Business Victoria suggest following up with a friendly courtesy reminder by phone, email, or letter.
Other ideas to try and prevent overdue payments include keeping in regular contact with customers, sending your invoices out as soon as the job is complete or offering a small discount for early payments.
Set up a separate business bank account
Keeping your personal bank account separate from your business account makes it easier to analyse and track your company’s cashflow. If you’re a sole trader, you legally do not require a separate bank account for your business, but it will make things easier when tax time rolls around, and when planning business expenses ahead of time.
Be tax ready
Plan ahead by setting aside money throughout the year for your income tax payment. You can set up a separate bank account to deposit portions of your takings into, so you don’t feel the weight of an inconvenient tax bill. If you don’t meet your tax obligations, you may face hefty penalties or legal action from the Australian Taxation Office.
Plan for the holidays
Save a little extra on the side to keep you afloat during quiet periods. If your work is affected by holidays, seasons, trends etc. make sure you’re setting aside extra funds during the busy periods to compensate for this.
Ask for advice
Feeling confused when it comes to your business cashflow and creativity? Find your tribe. Turn to mentors and your industry community for invaluable advice and tips from those who have been where you are.
More than a third of respondents to the Choosi Dollar Report say social media helps them learn about managing finances and what’s going on in the economy, so don’t hesitate to embrace the digital world for ideas and support.
Cashflow is the lifeline for every self-employed worker, which is why trialling as many handy tips as possible may be the key to achieving a consistent income stream. Tweak the ideas you find to suit your business style, and enjoy more time to get the work done, and less time stressing about money.
If you run your own business, it’s also important to consider what could go wrong, as this could affect your income stream and business future. Considering business insurance could be a wise decision, as it could help provide financial cover for material damage to your business premises and its contents, (including loss, damage, or theft) as well as cover (sometimes optional) against any resulting financial loss from an insured event which was caused by business interruption.
You could even consider getting public liability insurance and professional indemnity insurance depending on the type of business you run. Find out more in Choosi’s Business Insurance FAQsFrequently Asked Questions.
10 May 2018