A sole trader is a self-employed individual or the owner and operator of their business. Essentially, as a sole trader the individual is responsible for running all aspects of their business, including the most important aspect, the money. They are legally responsible for all spending, savings, debts, and losses. This means that saving money is one of the most important elements of your business for continued viability in the long term. The following guidelines will assist with ways in which you can save money.
Knowing Your Financial Position
This may seem like a simple concept, but many people endeavouring to run a small business don’t have a full understanding of their true financial position during the year. To ensure that you have a good grasp on this, having a profit and loss book or spreadsheet is a quick and simple way for you to keep an eye on where your finances stand, especially leading up to the end of the financial year. If you still feel this is not a strong point for you then link yourself with an accountant and ensure you build a solid relationship to receive support and understand your finances.
Have a Strong but Realistic Financial Plan
A financial plan is a document that details a person’s current financial circumstances. This document should also include short and long-term monetary goals along with practical strategies to achieve these goals. Your financial plan should provide a very clear picture of your cash flow, savings, debts outstanding/accruing, investments, insurance, and any other related monetary aspect of your financial life. The purpose of a financial plan is to reduce your stress regarding money flow, support your current business needs and ideally provide funds for you to build upon for your retirement. A financial plan should be looked at as an ongoing process to ensure you are making the most of your assets and weather any bumps in the road along the way.
Management of Cash Flow
Cash flow can be a challenging aspect of managing your own business but following a few simple rules will assist with making sure that you are in a good position at all times. Invoicing immediately after you have delivered your product or service is a good starting point, as it ensures you will have a constant source of cash coming in. It’s important to also be fair with your customers but never excessively lenient, provide fair notice of payment required but don’t be a pushover. Feeling confident to take formal action as a final step if needed is important to ensure you are looking after yourself legally.
Keep Business and Personal Separate
Keeping your books up to date, essentially recording everything in the above-mentioned profit and loss book or spreadsheet will allow you to see everything relating to your business at a glance. Another factor to keep in mind when dealing with your company’s cash flow is never mixing your personal finances with the business ones. This is extremely important for you to be able to accurately track your business finances and plan the future without your personal finances complicating the picture. Finally, building a cash reverse will allow you to manage unforeseen events or circumstances quickly and efficiently. Nobody foresaw Covid-19 but this had a massive impact on businesses and the ones that weathered the storm best were the ones who were prepared and had funds set aside for such a moment. Having a cash reserve also gives you an excellent chance to take advantage of opportunities when they arise, for the growth of your business.
Buy Bulk & Buy Wholesale
When you oversee all decisions relating to your organisation, a smart move is to purchase products wholesale. This means that when sourcing products, you need to think of the bigger picture and what is going to be the cheapest and most sustainable option for the long term. Look into opportunities to purchase things in bulk where suppliers offer discounts for buying larger quantities in one transaction. It always pays to conduct your research and purchaseitems wholesale. For example, if you are running a photography business then sourcing a supplier where you can purchase cheap photo frames wholesale means you will be able to pass the savings onto your customers but still focus on providing the highest quality service available.
Go Paperless
Good for the environment and good for your pocket, going paperless is the way of the future. The money you will save on the cost of printers, ink, and paper is only the beginning of what going paperless could do for your business. Going paperless can also assist with saving you storage space, allowing you to utilise a smaller office space or even work out of your own home. Your important work documentation is more secure on a password-protected computer than it is in a filing cabinet. Along with allowing you to be more mobile, you can complete all your forms and documents digitally, provide the information immediately to your customers, and back-up those documents automatically in your database.
As with all businesses, the goal is to be viable and profitable in the long term. This is especially important for a sole trader, as your business is not only your livelihood, it’s also your dream and you want it to succeed. Having a business can be expensive, but following the above steps will assist with saving you money so you can focus on what is most important – running your business and supporting your customers
