In recent years it’s been estimated that there are almost 200,000 sole traders in Britain – a statistic which reveals just how popular this mode of working really is. However, it’s also widely known that being a sole trader brings with it a whole host of additional challenges that working in a larger organisation does not, and one of these is the fraught world of finances. From filing a tax return to making significant financial decisions, there’s an awful lot to do. This article, then, will provide some pointers on how you can get your business finances under control if you’re a sole trader.
As with any important task, beingorganised is the key to success. Managing finances as a sole trader is the sort of chorewhere that is vital.There are all sorts of documents that you’ll need in order to file your tax return on time, including your invoices for the year. You’ll need to remember unique reference numbers and login details for the HMRC online portal, too. It’s also definitely in your interests to be organised becauseyou can claim allowable expenses on a number of different costs in order to bring down your overall bill, but you’ll need to keep your receipts in order to know how much to claim.
Consider an accountant
For some sole traders, however, this kind of personal financial management isn’t something that’s easy – or, in some circumstances, even possible. Whether you’re too busy or you’re simply not so good at numbers, sometimes it’s easier to outsource the work to someone else. Accountants specialising in small business accounts can help you to ensure that you claim everything you’re owed under the complex tax laws, and they’ll also be able to take on the burden of remembering the date of each deadline.
Build up a buffer
While it’s not something that many sole traders like to think about, it’s unfortunately inevitable that some spare cash to tide you over will be required from time to time as a freelancer. Sometimes, clients simply don’t pay up when they’re supposed to – leaving you with bills to pay, but less income than usual. And on other occasions actually sourcing the work can be tough, especially if there’s been an economic downturn. In order to get through these periods, a buffer is essential. Keeping six weeks’ worth of earnings in your bank account is pretty much essential, just in case – although in an ideal world you may be able to keep more. That way, you’ll always be confident that you can pay the bills for a month or two even if things go wrong.
With many sole traders finding it difficult to get their finances in order, it’s clear that taking steps to get the problem under control is wise. Whether it’s staying organised through the use of a diary or calendar, investing some cash in working with an accountant or a mixture of several options, there’s a lot you can do to ensure you stay organised.