Of course, there are a few downsides too. One downside being salary payments don’t arrive with your tax and National Insurance contributions already paid on your behalf.
With no accounts department or HR teams to fall back on, you’re forced to wear a multitude of hats as a self-employed worker. So whether you like it or not, you’re going to have to take charge of your own business finances. Depending on your experience with bookkeeping and administrative tasks, this can be quite a challenge.
To get you started on the right path, we’ve prepared a checklist of six ways in which you can take control of your financial affairs. The sooner you get on top of your business finances, the higher your chances of running a successful small business. You’ll also avoid unnecessary stress when it’s time to pay your taxes!
Like most professional people, accountants charge for their time, but some business expenses quickly pay for themselves, and this is one of them. Find an accountant, bookkeeper, or perhaps a financial advisor, who can start you on the right path to successful business expense management.
Your accountant will be able to suggest suitable software for managing your books, in addition to showing you what financial records you need to keep. If you’re not interested in completing tax returns yourself, your accountant will be able to do this for you each year for a modest fee.
There are plenty of bookkeeping and financial software programs that are specifically aimed at making light work of small business finances. Don’t be tempted to purchase software just because it’s low cost, or on special offer. Take time to study the features of each platform to make sure that you choose the right option for your specific business needs.
If you have a financial advisor or accountant already, they might be able to point you in the right direction. Otherwise, ask those around you, such as friends, family and other small business owners for advice, or read online reviews to find out what other people in similar situations recommend.
A significant percentage of self-employed people use one single bank account for both their personal and professional income and expenditure. There’s no specific law against doing this, and for a lot of people just entering the business world, it might make good sense. However, it’s important to note there are financial benefits in separating the two.
Having a dedicated online business bank account makes it much easier to keep on top of your financial affairs. While this may not seem particularly important in the early days, but as your business grows, it will become increasingly time-consuming to reconcile your bank statements. It will also become more challenging to work out which expenses are personal and which are business-related.
If you want to keep track as to how well your business is doing, you need to keep a close eye on your budget. You need to be sure that you have the cash flow to support mounting business costs. Software tools such as Soldo will help you to monitor company spending in real-time, enabling you to have better control over business finances. As the business owner, you will also need to hold money back for taxes, and unexpected costs such as repairs or replacements for equipment.
Time is one thing that always seems to be in short supply when you run your own business. But with nobody else to rely upon to keep track of your financial affairs, it’s vital you keep on top of them yourself. The best way to do this is to schedule time into your diary.
Depending on the nature of your business, this could mean anything from a daily, weekly or monthly review. The key is to allocate this time in your diary and stick to it without exception. Reconcile receipts, monitor your invoices to chase any that remain unpaid and update any spreadsheets or software applications.
Other than ensuring that your business finances are in good order, these sessions will enable you to assess how well you are doing. Reviews will allow you to spot any trends, such as reoccurring outstanding debts, or unnecessary expenses, leaving you better able to react on time.
This might seem counter-intuitive; after all, you’re self-employed, but it’s good business practice, especially if you intend to grow your business. Self-employed business owners discover that sooner or later companies go through both profitable and lean periods. Paying yourself a regular salary allows funds to build up in your business account. A surplus in the business account means that you won’t go short, covering your business should you encounter any unexpected business expenses.