Seven Budgeting Tips For The Self Employed
Updated: Apr 5, 2022
Budgeting isn't a skill everyone falls into naturally. Chances are if you are a professional budgeter you wouldn't be reading an article like this. However, everyone starts from somewhere so if you're struggling to get your budgeting in order for your self employed business then read on!
Today we are sharing seven of the best tips we could think of to help you budget better.
1. Separate Your Transactions
Being self-employed you aren't actually legally obliged to have a business bank account, but we strongly recommend it. Having a separate bank account for your business transactions makes your bookkeeping and admin so much easier. It will save you hours of filtering out your business spending and income from your personal transactions.
Even opening another personal bank account is a quick fix and can be done online in a matter of minutes. Make sure to check your bank's T's & C's though as some do prohibit using personal accounts for business transactions.
Once you have your business bank account set up make sure to only use that account for business financial comings and goings.
It's worth noting here that if you have a Limited Company you are legally bound to have a business bank account.
2. Track Everything
Track every single transaction you make over the next few months and throw them into a spreadsheet. Allocate them into columns named rent, cost of goods, supplies, office equipment etc and work out how much you regularly spend on different things.
Once you have a few months of data you will clearly see how much money you are spending on different things and easily decide if you are over or understanding on various things.
You can use accounting software (we love Xero) to make tasks like this automatic as the software will recognise repeat transactions and allocate them as necessary.
3. Set Spending Limits
Once you have a rough idea of your comings and goings its time to actually start the budgeting process.
Take an average of all of your different spending categories and then adjust that number to a point that you think is acceptable. Work out where you can save or should be spending more.
Set your monthly spend limits for different things in stone. Strive to never break your limits. If you do find yourself going over budget on certain spending have a rethink if your spend limit for that particular cost is too low or you are being too lenient with yourself. Money won't spend itself so overspending is always human error.
4. Make Revisiting Your Budget A Habit
Revisit the budget once a week at least. Track your weekly outgoings to make sure you are staying within your spending limits. You have to be honest with yourself here. You set your limits for a reason so make sure you are staying within them.
Creating a habit takes time so make a repeating task in your calendar to visit your budget and track your spending regularly. After doing this a few times it will be a quick task taking about 10 minutes.
5. Generate Regular Income
This point is all about income, specifically the regular kind. Budgets are so much easier when you know how much money is coming in and when.
Part of running a business is generating sales, a lot of sales. Depending on your business type this will vary from selling products to selling services but we all need that regular income to stay afloat.
Working on your sales funnel/ pipeline is the best way to create a consistent stream of sales/customers. Research how other businesses in your sector are finding their customers then start doing what they do.
6. Plan For The Quiet Season
Not all businesses are evergreen when it comes to income. Christmas time is often a mega busy period for people selling products, but gardeners and landscapes typically have a very quiet winter period.
Every business will have its unique ups and downs in its trading year so make sure you save enough during the good times to keep you afloat when things quiet down.
7. Don't Forget Taxes
Don't forget to save for tax. Don't forget to save for tax. Don't forget to save for tax. ?Hopefully, you will now remember to set aside at least 25% of your profits for your year-end Self Assessment tax return. HMRC have a great tax savings calculator you can use to work out your numbers.
And there you have it! We hope you have found some value in this post and can apply some of these tips to your own self employed business. See below for some further reading that might interest you.