Freelancer Money Saving Business Tips
Know your financial position
It is a good idea to monitor your financial progress closely and periodically. This is an easier task to manage using cloud accounting programmes, which clearly show your financial status. Every month or quarter you can review your position against your goals and targets to ensure you are on the right track. If you find figures a bit of a struggle, or just prefer to be doing what you love, ask us to do it for you and receive a monthly, easy-to-digest financial report.
Know your profit!
Turnover is vanity, profit is sanity! Knowing your turnover is good but knowing your net profit is key to the long-term health of your company. Knowing how much you can draw from your business in dividends and how much you need to save in tax at regular intervals will give you clarity and peace of mind, and you can start making savings by storing your tax in a high interest account.
Open a Company Tax Savings Account
Store your tax savings in a Company Tax Savings account to save whilst you wait to pay your tax bill. Ensure if you are a Limited, it’s a Limited Company, not a private account, otherwise you will pay dividend tax on anything you transfer into it. Most business accounts come with the option of a savings account, so don’t be shy in asking for one if you already have a company bank account, or are just about to open one.
Keep your books up to date
It can be very tempting when you are engrossed in an exciting project to put off doing your books but procrastination could leave you falling behind, having a frantic period just before the submission date, not saving enough tax saved, or failing to invoice a customer. It’s good to get into the habit of working on your finances once a month, or at least once a quarter to keep your books on track. It’s also worth remembering that you can be fined up to £3,000 by the revenue for failing to keep proper records!
Adopt Effortless Filing
It can be easy for paperwork to get into a mess. Before you know it, you have piles of emails, paperwork, or digital paperwork that is all getting just a bit out of hand. Use these simple tips to keep on top of filing. With recent technology, it’s even easier than ever.
- Hubdoc is a programme which retrieves bank statements, invoices and receipts from your online accounts into handy, automatically-downloaded files, neatly filed by vendor, securely in the cloud. Once set up this is truly effortless filing, with the added bonus of being able download historic information. Each time a new file is available you’ll receive an email about its arrival.
- You can manually forward emails with invoice attachments to Hubdoc, where it extracts, downloads and sends the invoice information directly to your cloud accounting software.
- Some clients prefer PDF’s to photographing receipts (to save on disc space) using an
- Using a cloud programme such as Dropbox or ‘One-Drive’ makes it really easy to file paperwork electronically, and because it’s all filed on the cloud, it’s easy to go back and find things in the right months in the future.
- Dropbox is a favourite, which makes filing really quick and easy. Simply snap a photo of the invoice with your smart phone and save it directly to the cloud.
- App called ‘Genius Scan’ – which PDF’s the photos ready to store online.
- Contact us about unloading your documents directly to your accounting programme by simply snapping a shot and saving to the app.
Meet Tax Deadlines
Failing to meet tax deadlines for filing returns and payments can be a costly business as fines, penalties and interest can all be incurred. These are unnecessary costs that can be avoided with a bit of forward-planning. Ensuring you meet deadlines will save you money!
Chase Debts – Cash Flow and Debtor Days
Don’t let unpaid debts build up; take action and chase! This is especially important for small companies with limited cash flow. Consider when you set up your company how many days credit you are willing to give and bear in mind that the days will tend to be ‘doubled’ by debtors lagging behind with payments, so seven days becomes fourteen, thirty days becomes sixty, and so on. So, if money is tight, keep the credit days small and send a polite reminder on the first day the invoice is due. Check the client received the invoice okay and remind them its time to pay.
It is easier to get clients into good payment practices when you first start a business. Clients tend to adopt the rules from the start, so ensure you start off as you mean to go on. Outstanding invoices represent money you have already earned, funding someone else’s company and, unless you’re ‘the-bank-of-[insert name here]’, we guess you’re not in business of lending money. Chase it up. Companies that operate stricter credit control systems get paid faster!
Ask us for a copy of our ten-point credit system if you have a difficult payer.
Cash is King
Even the most profitable companies can become unstuck if there isn’t enough cash to cover day-to-day running costs. Knowing the minimum your business needs to operate and break-even means you can factor this in and creating a cash-flow can help you ensure you never drop below that level.
When your figures are delivered on a regular basis, it is easier to predict how much money is going to be available in the future. We give our clients free cash-flow templates to help work out how things might look in advance, so you can take action well ahead of any predicted shortfall.
Spread your risk
It is better to build a larger portfolio of smaller paying clients than to rely on a small pool of large paying clients. Larger companies can sometimes wield too much power or time over smaller firms and if they become insolvent, demand a greater number of credit days than you can afford, have a longer payment processing system, or suddenly switch to doing business with your competitor, the impact on your business could be catastrophic. Where possible, build up a larger portfolio of smaller contracts to even the spread and ensure all your eggs are not in one basket.
Have a plan
You would never get on a train without first deciding on the destination and it’s the same for a business. Consider; Where are you going? Where do you want to be? How will you measure your success? Who will help you? How will you do it? By When? Commit your thoughts to paper and create your ‘Financial Business Plan’. A clear plan will establish where you are and where you want to be over the next three to five years and can be reviewed as often as you wish to check you are on track.
Be S.M.A.R.T. ensuring your goals are:
- Realistic and
- Time scaled.
Back it up with projections, budgets, cashflows and forecasts, remembering to include what the money will help fund! Whether that it’s a lifestyle, holiday, dream home, pension or any other thing you desire, use that feeling of what that goal will feel like once achieved to help bolster your daily activities. What you think about, you bring about! Good luck.