As a sole trader, you can enjoy the benefits of self-employment and can focus operating your business with your goals in mind. One very important area to manage is your money matters such as incoming revenue, outgoing expenses and capital.
Starting a company takes many hours of hard work to develop a plan to get the business off the ground. There is a lot to learn to become a sole trader and the best way to protect yourself from unwelcome surprises is to plan ahead.
Being financially and legally prepared is key to giving you peace of mind so that you may focus on launching and growing your business.
Public Liability Insurance
Protecting your business is critical. Every company needs to be properly insured to cover all that you have built. Public Liability insurance is designed to provide protection for you and your business in the event a customer, supplier, or a member of the public is injured or sustains property damage as a result of possible negligent business activities.
Public Liability Australia has access to a network of insurance companies and can quickly provide you free, multiple quotes so you can compare policies without the need to ring around or visit multiple websites. Within minutes you will have options to choose from and can obtain coverage immediately.
Obtaining several quotes from different insurance companies will allow you to see not only the different coverage levels but also the cost of each policy. BizCover can make this process easier and faster. For more information regarding the benefits of Public Liability insurance coverage, please go to https://www.publicliability-australia.com.au/sole-traders-insurance/.
Cash Flow Management
Many sole traders earn a good living. Like many types of businesses, some periods of time may be stronger than others and the cash flow can be strong one month and significantly weaker during another month. During these weaker times, it may be weeks or even months that you are unable to draw your own wages.
In order to help manage your cash flow, only make larger purchases or investments in your business after you have paid yourself and covered your regular bills. Also, make sure you set money aside and have it available should an unexpected expense come up.
As a sole trader, you do not have the benefit of sick leave or paid holidays so make sure to put a little extra money aside. These savings could come in very handy to help during lower cash flow months or be available should you need a well-deserved break.
Keep Business Accounts and Personal Accounts Separated
Although you own the business, you should make a clear division between your business bank account and your personal bank account. Keeping these accounts separated will help you manage your money more effectively in both areas.
When you pay yourself a wage from the company, ensure the timely transfer of the funds from the business account to your personal account. This will help you easily manage your own personal finances, as well as help you view the cash flow movements of your business account.
Be Prepared for Business Taxes
It is easy to focus on taxes at tax time but it is important to think about taxes all throughout the year. Work with an accountant to ask questions, get advice and plan for the upcoming year. This will allow you to be properly prepared when tax time does roll around, as well as puts you in a good position to take advantage of opportunities to support your business. A well-informed accountant can provide you with tips which will help your business save money and be prepared for unforeseen issues.
As a sole trader you are self-employed, so you need to pay your own income taxes.
Preparing to pay these taxes throughout the year, by putting aside the funds as you are earning it, will make tax time much less stressful. Instead of waiting to receive a large tax bill, you will have slowly put aside the money needed all year and will be prepared to pay what is necessary when it is due.
It might be easier to open a specific account just designated to saving a percentage of your wages each time you get paid for your taxes. Do not mix these funds with other accounts, that way you’ll know that this money has been set aside specifically for your taxes.
Goods & Services Tax (GST)
If your business earns over $75,000 per year, you must register for GST. Once you’ve registered, you must lodge a regular Business Activity Statement (BAS) to report how much GST your business has collected and is claiming. This may be paid quarterly or annually. Check with your accountant for the correct way to ensure this is paid in the correct and timely manner.
Work closely with your accountant regarding tax deductions. You may have the opportunity to claim some of your business costs against your income, ultimately resulting in you paying less tax. Keep all your receipts in case you need them.
Don’t Forget Your Super
As a sole trader getting started with your new business, the Superannuation may not be at the top of your priority list, but it is important to think about it early. Super is a tax-efficient way of saving money to live on when you stop working.
It is now up to you to make these contributions yourself as you are now your own employer. In addition to investing in your future, adding to your super can reduce the tax on your current income. You may also be eligible for the government super so-contribution. Contact your accountant for specific requirements.
Protect Your Business
In addition to Public Liability insurance, you will want to protect your overall business with additional coverage. Other policies that can help protect your business and provide you with peace of mind include comprehensive business insurance, business interruption insurance, product liability insurance. By having these protections in place, you can rest assured that you have protected your business that you have worked so hard to get started.