Every entrepreneur trying to succeed today is facing an uphill battle. However, sole traders have even more responsibilities than most. Here are three money management tips that any sole trader can use.
Get An Accountant
Whether you are an individual trader or a small business, having your own accountant to help you manage your money will dramatically reduce the number of mistakes you make with your finances. You should be keeping track of how much money you are making and spending as a matter of course anyway. But an accountant will help you to ensure that your records are accurate and that you are accounting, no pun intended, for every income and expenditure involved in your business.
Keeping inaccurate accounts can come back to bite you in a bad way. Not only does it make it more difficult for you to stay on top of things and keep track of how much money you have, but you also run the risk of facing fines and other penalties if you file inaccurate accounts. With an accountant looking over your shoulder, there is much less capacity for things to go wrong.
Think Carefully Before Taking Out A Loan
When most entrepreneurs find themselves short on money, their first thought is to take out a loan. A loan will provide your business with the funding that it needs straight away, the only catch is that you’ll have to meet repayment obligations. You should never enter into any kind of loan or financial arrangement without a good understanding of what will happen if you fail to keep up with your repayments.
For example, you should know the difference between a defaulted loan and a delinquent loan. A delinquent loan is one where the borrower is late in making a scheduled payment. On the other hand, a defaulted loan is one where the borrower is no longer able to make payments on the loan and is unable to meet the repayment obligations as laid out in the loan promissory note agreement.
Apart from these considerations, you might need to be aware of the scenarios in which promissory notes become null and void. So, what makes a promissory note invalid? Some of the circumstances that can render a promissory note null and void could be when it is not signed by the borrower, when an unusually high-interest rate is applied, or when the original note or a copy is lost, and so on. As a result, whether you’re writing a simple promissory note, a demand promissory note, or a customized note, it can be a good idea to start with a tested template. That way, you’d probably use correct language when creating your document and avoid any unpleasant surprises that could lead to a contract breach.
Set Yourself A Realistic Budget
Whether you are managing money in a personal or a professional context, it is always helpful to have a clear budget set out. An accountant can help you to stay on top of all of your business finances, but when it comes to managing your own money, you are going to have to take some responsibility for yourself.
When you are a sole trader, there is often a considerable overlap between your personal finances and those of your business. As a result, anything you can do to manage your finances better in your personal life can also have a positive impact on your professional finances. Realistic budgeting is easier said than done; many people either set themselves a budget that is far too ambitious and unachievable, or they are unwilling to make the kind of changes that they need to do to improve their financial situation.
As a sole trader, you are responsible for staying on top of everything in your business. That means that you need to be responsible for managing everything from your professional insurance to your day-to-day business finances. Stick to the advice above and you should have no trouble managing your money effectively.