Many Australians will agree that working for yourself is one of the greatest things you do! You’re your own boss…answerable to no one. However, working for yourself poses the problem of managing all your business’ finances, which over time, can become an extremely difficult task to maintain.
This is how you can be your own boss and stay on top of your finances:
1. Your Salary & Cash-flow
Most Australian business owners may be doing very well already; and on the books, things may possibly be looking really good. All staff are paid on time and all suppliers are duly paid for their services. However, where is this money coming from? Is it borrowed money? Is it coming from a cash-flow that is sponsored by your initial investment?
There will be a time when the initial money cannot manage everything, and you may have to input some extra credit to see you through drier months. For this reason, it is important that from the start, you issue yourself a set salary, entirely separate from profits and shares. This must be part of your budget or you may end up having to borrow more than you can repay.
2. Your Pension & Tax
It may be all about the launch parties and initial success in the beginning. You may even be too young an entrepreneur to even imagine the thought of greying hair or ailing health. But trust us, the helium balloons go flat and the foot-traffic eventually slows down.
Basically, you need to be a responsible business owner and take care of yourself by taking care of your future.
You should invest in your superannuation, so that you may one day retire comfortably and without the need to rely on government assistance. The government can also help you now, as it will add co-payments when you invest in your super.
3. Your Insurance & Protection
It is essential that you are insured in the event of injury or death, so that your business doesn’t suffer or have to bear any untoward costs should something occur.
Having this plan in place is also important for sole proprietorships, because if something unseemly was to happen to you, you would want to ensure there is still a way to have an income for both you and your family, and ensure your business continues to succeed.
Income protection is something you may also want to consider, especially since most policies are tax-deductible. It is certainly worth considering in the event of a sudden illness in which you are incapacitated to work, but wherein the bills keep piling up. This insurance policy will protect you for a period of time and ensure the business continues to flourish, even in your temporary absence.
When running your own business, it is paramount that you continually take care of yourself as your business continues to flourish. You must treat your business as a business, and not a self-commanding enterprise, because at the end of the day (or more specifically at the end of the tax season), you will want to see the returns you envisioned at the onset of your business venture.
FCPA & CA
Shane is a Fellow of the Australian Society of Certified Practicing Accountants and a Chartered Accountant.
Shane’s passion is to consider the clients, the client’s business and taxation affairs with a holistic approach whilst providing business mentoring, business strategies, systems development, taxation advice and taxation planning in order to assist his clients and their business achieve their goals.