Self-employed workers need to carefully manage their profits, tally their costs and plan their income tax filings. While a bigger business will have a team working on the ins-and-outs of their finances, self-employed people are alone in this. They have to carry the burden on their own.
If you’re self-employed and you’re wondering how you’re going to tackle your business finances this year, here are six tips that will make the job much easier.
1. Get Help When You Need It
Sometimes you have to admit to yourself that you’re in over your head. If you’re swamped with outstanding debt, and you’re not sure how you’re going to pay it all off, you should go to a licensed insolvency firm like David Sklar & Associates for help. They offer important services like credit counseling and consumer proposal applications. With that kind of expertise, you can pull yourself out of a tough situation relatively unscathed.
2. Don’t Mix Business with Pleasure
If you make regular expenses for the sake of your job, you’re going to want to get a business credit card. Using your personal credit card for this is a terrible idea. It sets you up for a bookkeeping nightmare where you have to comb through your receipts and bank statements to separate the business purchases with the personal ones. Plus, getting a business credit card will make sure that your consumer credit score is unaffected.
3. Have a Back-Up Plan
Always prepare for the worst-case scenario. What if your computer stops working? What if your office-space gets flooded? What if you have to put your work on hold for a few months? These are scenarios where an emergency fund will come in handy. You can use it to support yourself through a rough patch or you can use it to cover important repairs/replacements that will get you back to work.
4. Keep Track of Your Finances
You don’t have an official bookkeeper. So, you’re going to need to keep a close eye on your finances. Use small business apps to help you accomplish crucial tasks like tracking your billable hours, outstanding payments and recent profits. Make a habit of checking on the app. You don’t want anything to slip past you.
5. Prepare for Tax Season
Filing as a self-employed worker is always more challenging. To make the process smoother, you should consider going to a tax accountant for assistance. If you’re going to do it on your own, make sure to give yourself plenty of time before the deadline.
6. Be Careful about Deductions
You will have to deduct business expenses when you file for your income taxes this year. It comes with the territory of self-employment. While there is no problem with claiming deductions, you should be careful about what you file. Anything that could be seen as unreasonable or transparently personal — like your afternoon coffees — could flag you for an audit. Don’t go overboard.
Managing your business’s finances is difficult, but it’s not impossible. By following these simple tips, you can ensure that your finances are taken care of and that your stress levels are low.
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