Best Tips for Self-employed to Manage Cash Flow

Flow of cash is actually very tricky at the best times for the self-employed. In these times contractors and fTo support your income during the coronavirus crisis and without a limited self-employment income support plan, cash flow management is more necessary than ever.

 

You need to find out the ways by which you can improve your cash flow even when things are tight – and find ways to get your money back freelancers are feeling much pinch which they never ever felt before.

Try to Sell Outstanding Invoices

Over 60% of invoices are basically paid each year. While businesses that understand this are struggling and having tough time right now, it is very important for clients to know that you are also a business!

If you have a good relationship with your client, then find out if there is a reason for the delay. For those people who are currently struggling, offer to invoice small refunds (but with extra interest) if you can afford it. It helps to maintain a good relationship for the future.

But, if your late payment reminders fall on deaf ears, you can always sell your invoices! Companies will buy your invoice for a lower fee (usually 10%). Then, they like to chase the payment they get instead of you. Recovery you can also increase the invoice amount to cover the recovery costs (so you actually lose nothing).

Selling invoices is a great and best way to increase instant cash flow. If you want to have a consistent and firm relationship with your client, then third party involvement will create some sort of tension from your current situation.

Always Work out Your Taxes

Freelancers and contractors are all afraid or feared of tax time. This is even worse with payments in the account – paying ahead of next year’s potential tax bill.

We squirrel a portion of each invoice paid, but you can keep more away than you need.

Make your tax return now – without having to wait until January. You know how much you have to pay for HMRC. Anything beyond this level can be reinvested into your business to reduce any cash flow left in your savings account.

Try to Defer Tax Payments

If you already know about how much to pay to HMRC, but you need to use those savings for immediate business bills, then try to defer your tax payments.

Payments can be made in the account from July 2020 to January 2021 without deferment and without interest. The same thing happens with your VAT payments. You still have to make a VAT return – but not until March 2021.

This can help give you some breathing space if you have supplier invoices or business rent as an urgent need. Remember, however, that if you are spending what you have saved for taxes, by January 2021 you will have to save the same amount again. If you cannot guarantee that it will happen, it is better to avoid procrastination (or above all, use only some of your tax savings).

Keep An Eye on Your Pension Relief

If you have been a very high-rate taxpayer for the recent past four years, then you may be eligible for a pension tax deduction. Find out if you are getting a pension tax relief – if you do not, HMRC owes you a good amount that will increase your cash flow!

Claim Your Marriage Allowance

The great news for married couples is that they can transfer 2 1,250 of one spouse’s personal allowance to another spouse. If anyone of you earns less than the annual personal allowance, 500 12,500, then that person can transfer it to their spouse or civil partner at the basic rate to the taxpayer.

This tip reduces the amount owed to the tax-paying spouse each year by 250, which is a big term. This allowance is backed up to three years from the date of claim – even if you are married for a fraction of a year.

Always Have a Look on Benefits Entitlement

As your income has changed in the recent months, you may be entitled to certain kind of benefits that were not previously available to you.

If your income falls sharply, for example, if you are eligible for Universal Credit.

You stopped receiving Child Benefit because you are earning more than 60,000. Now that your income is low, the benefit is worth applying to start an art again.

Use the Benefits Calculator in Turn 2 to find out what else you can claimays have a look on benefits entitlement:

Claim Cash back from Different Utilities

Most of us have a laid back attitude or show much laziness when it comes to painting a picture about gas and electricity bills. We accept expectations rather than actual readings – or have to pay a set direct debit each month to control costs (and accumulate winter payments).

First, update your readings if you always go as expected. Most companies overestimate, so you can get credit in your account.

Second, if your account is on credit, you can reduce your monthly payments – or request a refund. You deserve money – it’s yours! – But to get there you have to write some emails. Some people are sitting on hundreds of pounds in their energy accounts, so it’s worth it.

Finally, change your energy suppliers if you can find a cheaper deal. This reduces long-term costs and also saves your monthly outgoing.

Look at Different Options for Local Funding

Government loans through various coronavirus business loan schemes help short-term cash flow – but they are still loans. Fortunately, for small businesses and loans up to 50,000, these are now 100% government-guaranteed – reducing the risk of your personal impact if you struggle to repay.

However, it is still a debt. You have to pay it back!

Instead, always look for different local funding options. Many councils and local authorities are running grant schemes to keep businesses afloat. For example, the York City Council has given a micro grant of up to £ 1000 for self-employed sole proprietors and small businesses who do not have access to the SEISS scheme.

All you need to do is direct application for such schemes means that you are more likely to get money faster than waiting for the government scheme to pay off.

Redo Your Budget

Paperwork is usually much boring – but it is also important to stock up on your business expenses and find where you can cut them. This will give you a clearer idea of ​​what you are actually spending each month – and will help you cut costs.

For example, have you ever signed up for a free trial of software, continued to use it, and let money leave your bank account every month? Usually there is a cheaper range that you can switch to – or, if you do not use the software, cancellation can save you a lot of money.

Also check your phone and internet bills. It may be time for a simple switch to save on monthly bills – going for a sim-only deal if your handset is still good is a great way to reduce costs.

Reducing everything may seem like a good plan in the short term – but consider the long-term impact. You can hire a virtual assistant, for example. Instead of cutting their contract, see how they can help you (looking at your budget, for one thing!). Find ways to use those that save your time so that you can focus on creating more business to improve cash flow.

As a Self-employed Ask Your Questions

This is actually a very difficult time for all the self-employed contractors right now – but in this critical time you are not alone. The new Money Magpie message board is here to help! Get involved with like-minded people to find more cash flow management ideas and ways to make your money.

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