A lot of us aspire to start a business and become our own bosses, hoping it will bring with it much more flexibility and more independence than being employed does.
However, with self-employment comes a lot of responsibility and uncertainty, especially when it comes to your income.
Relying on what often is an irregular income when self-employed can be stressful, but there are you few good ways to manage your finances to make life that little bit easier.
1. Make Realistic Financial Projections
Budgeting is an incredibly important part of being a business owner; when putting together your business plan, be sure to include accounts and financial projections for the next year or two at the very least. Make sure you list all expenses and plan for any unforeseen costs that may arise. Having clear accounts will help you stay on track with your finances as well as have a benchmark against which you can measure your success.
2. Have Time for Administration
When you are your own boss there will be a lot of decisions and people demanding your attention. It is important to set aside time every day to do important admin tasks or at least have someone in place to make sure these are done for you. The type of admin that shouldn’t be pushed back is sending out and following up on invoices as well as pitching for new work; these tasks will ensure that there is money coming into the business – the lifeblood of your company.
Saving is never an exciting thing to do, but can be incredibly important to your business’s survival. If you are relying on an irregular income, it’s advisable that during the months where your business is booming you try to put some money aside for the less prosperous months. Having some cash put aside will help make those less successful months slightly less stressful and ensure your business will stay afloat.
4. Know What You Can Claim
When you are self-employed you can claim back certain expenses from your taxes. Make sure to read up on which expenses you are eligible to claim on so you are not paying more tax than you have to; often the expenses you can claim back on includes tools, stationery, IT as well as rent and even overheads such as a portion of your lighting and electricity household bill if you work from home. Knowing ahead of time what you are entitled to claim back is important as you will have to show evidence of the expenses through receipts etc. when filling out your tax return.
5. Create Separate Accounts
Managing and keeping track of your finances is a lot easier when you create separate accounts and use each account for a separate purpose. The best way to do it is to create one account for all income your business brings in, a second account where you will transfer the salary you are paying yourself from the first account – from this second account you will pay all your essential bills – and a third account to put money aside as savings for future months where your business isn’t performing as well. Setting up your finances this way will make it much to easier to keep track of where you are overspending and where you can make savings.
6. Look for Funding
Making enough to get by can be hard enough in the early days of running a start-up, let alone trying to make enough to invest back into your company for expansion and growth; it’s for this reason many start-ups look for grants, business loans and/or investors to help improve their company’s cashflow and make expanding much easier. Grants, if your business is eligible, are a great way to fund your business as they don’t need to be paid back and can give your finances a much-needed boost. If you wish to go down the business loan or investor route, make sure you have accurate business accounts and financial projections as well as a strong business plan. It can be a great idea to talk to experienced experts in your industry to find out which source of funding is best for you and the best way to get it.
About the Author:
Chris Smith is an independent writer and blogger at Spend It Like Beckham. His blog mainly focuses on finance and sports, and he’s had features about a variety of topics published on sites including the Huffington Post, GoDaddy, The Guardian and The Telegraph.