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Becoming self-employed is an exciting step for any mum, bringing with it opportunities to work around family life and generate an income. Every new venture comes with an element of financial risk – and as a sole trader, you are personally liable for any debts you build up running the business.
Luckily, with careful management, you can reduce the chances of falling into financial difficulties.
When your business starts to do well, it can be tempting to invest in brand new equipment or perhaps treat yourself to a new car, but this isn’t always the best option. Before spending, it’s important to build a fund to protect your finances in case of unforeseen events, such as an economic downturn, unexpected costs or late customer payments.
Always keep an eye on your finances, monitoring your income and expenditure and saving as much as you can.
While it’s great to receive enquiries and orders from customers, always be mindful of your capacity as a sole trader juggling work with childcare. If you accept too much work you may end up stretching yourself too thinly, to the point where you don’t deliver the quality customers expect. As a fledgling trader, your reputation is important, so don’t be afraid to recommend a trusted colleague for work if necessary. You never know, they may then recommend you for work in the future.
If you invoice customers, always be firm but polite when collecting payments. Give them a deadline to pay and always keep a clear email trail of your communications with them. If the worst happens, you may be able to recover missed payments through a small claims court. Although most of us hope to avoid this, it is sometimes necessary to protect your own finances.
Although your business and personal finances are directly linked, it is a good idea to run them separately. Open a business banking account and budget carefully – the last thing you want to do is dip into the household bank account to cover any shortfall. It’s also worth using a business credit card so you can keep track of your spending.
Before going into business, you should always make sure that your personal finances are strong and that you have removed any existing debt. Start by doing a ‘health check’ of all you outstanding credit cards and loans, paying them down as much as possible. If you are struggling with large debts, take the plunge and speak to a professional, who can help you come up with a realistic way to clear them.
To help you get off to a good start, you may be able to secure funding for your business, so always run an online search to see what opportunities are available.