Starting a business is one of the most rewarding steps anyone can ever take. An opportunity to build a future that is purely up to you!
Know Your Financial Standing
Being a sole trader and having complete control over your business and its finances can be daunting. It is important to know where you stand financially when starting your business.
As you are left alone to make these kinds of decisions, be as open and honest with yourself about what you need financially. Both personally and for your business.
It will allow you to make informed financial decisions for expenses and salaries. Keeping clear from debt and other overdrafts.
What Is A Sole Trader?
A sole trader is the sole owner of the business. You are in complete control over running and managing the business. It is the most straightforward form of owning a business.
You can employ workers, be responsible for paying them and be responsible for paying yourself. A great tip is to pay a portion of your salary into a retirement fund to secure your financial future.
As a sole trader, it is also imperative to note the tax specifications, as these are integral to understanding your financial needs.
Do You Need To Setup A Separate Bank Account As A Sole Trader?
It is beneficial that you open a separate bank account for your business. It will allow you to be in control of the finances of your business. Which you will then be able to keep separate from your finances.
With a business account, you are in control of your business’s financial information, which can help in tracking your income and expenses. This is beneficial when you would need to do taxes or any kind of financial reporting.
Have A Budget
Your business budget should include the following:
- Time frame – this can be monthly, quarterly or yearly.
- Fixed costs – fixed expenses such as salaries, rent and insurance.
- Variable costs – examples: utilities and cost of materials.
- Income – your expected business income.
It is important to monitor your budget, you will use a bookkeeping system to do so.
Have A Bookkeeping System in Place
A bookkeeping system is essentially a record of your business’s finances. It allows you to monitor the financial well-being of your business and will help you make informed financial decisions.
The records should indicate your business’s income, expenses and vehicles trips. It is also a professional way to prove that you are financially capable to banks and lenders.
Your bookkeeping system is dependent on the tax and retirement commitments as a sole trader.
Different types of bookkeeping systems:
- Manual bookkeeping: Cheaper to set up and will be easier to manage.
- Electronic bookkeeping: Automatically calculates your sums and takes up less space than a manual system.
- Accounting software: This can create invoices, update automatically, and create financial statements.
- Web-based bookkeeping: Can be used from any location and can be a cheaper option as it is online.
- Spreadsheet accounting: You can create spreadsheets on your computer or laptop.
- Point of sales Systems: Can automatically process your sales, expenses, invoices and more.
Set up invoices and payment systems
An invoicing system allows you to let your customers know what they need to pay for your goods or services. It is also a way for you and your customer to have a record of purchases made.
There are three types of invoices: regular invoices, tax invoices, and recipient created tax invoices.
There are many payment methods to choose from, these are the most popular:
- EFT Payment: A direct payment from a customer’s debit or credit card.
- Credit and debit card payments: A customer creates a debt owed to a credit provider when purchasing with a credit card. Whereas a payment is immediately deducted from the customer’s bank account when paying with a debit card.
Plan for your future
As mentioned before, it is critical to create a financial space outside of your business. Building a business that is completely controlled by you, also means that you need to take care of yourself.
Not only do you want to be financially stable now, but you also want to make sure that you have nothing to worry about in the event something happens to you. Or when you decide to retire.
Business adventures are fun. You get to build a business based on what you love and there is no better way to work than to do what you love.
Be sure to plan. Be honest with yourself about your financial needs. Your business will grow and you will be rewarded. For business loans visit Jacaranda Finance.