Get your accounting sorted out
We’ll get this one out of the way first. Yes, we’re accountants, so we’re going to tell you how important it is for sole traders to get their accounts properly sorted out. But that’s because it’s true. Staying on top of the numbers means you’ll know how much money is going in and out of the business, and it means you’ll file your tax returns and/or VAT returns on time and avoid fines from HMRC.
Get a business bank account
As a sole trader, you’re legally allowed to use your personal bank account for your business because there’s no legal separation between you and your business. However, there are still benefits to opening a business bank account as sole trader, such as making money easier to manage by making it easier to differentiate between the business’s money and your personal money.
The term ‘sole trader’ makes it seem like you can’t hire employees, but that’s not actually true. If you’re getting more work than you can tackle by yourself, consider hiring somebody to lighten the load.
You might need to register for VAT
VAT isn’t something that’s reserved only for limited companies. If a sole trader earns more than £83,000 they must charge VAT, though this can be used to offset any VAT paid on items and services used for business purposes.
Don’t forget to register your business
Registering your business as a sole trader is easy; all you have to do is inform HMRC. Register your business as soon as possible or you’ll face a fine.
Put some money aside
It’s tough for small businesses to get loans to invest in their business and buy new equipment, so you should always be trying to put some money aside to pay for these sorts of things, as well as to cover you when you are unable to work due to sickness or you just want to have a holiday.
Make a company website
In the 21st century, if your business doesn’t have a website it might as well not exist. They’re easy to make with inexpensive or even free services such as WordPress or Squarespace. You can use it show people what services you offer, or to show a portfolio of previous work.
Keep a diary
To do well as a sole trader you need to keep your clients, and that means always completing work on time. Keeping a diary will help with this. It’ll also help with the tasks involved with running a business singlehandedly.
Send your invoices as soon as possible
The quicker you send your invoices after completing a project, the quicker you will get paid, especially when it comes to clients who have a policy of delaying payments.
You can always change your mind and become a limited company
Most people, when starting a business, choose to become a sole trader because it is the simplest option. However, you can always change your mind and incorporate your business so that it becomes a limited company. This could be, for example, because you want there to be less risk for you personally if the business goes into debt.