Essential money management tips for trade business owners
There are many different challenges within a trade business, but one that we at Lifestyle Tradie hear about most, especially for small trade businesses, or from new start ups, is money management.
There are a multitude of ways you can modify your business and business processes and systems to put your trade business into better financial shape. But, there are a few simple things you can do in the everyday management of your trade business, that will instantly make an improvement to your finances.
Here are some everyday actions you can take to manage your finances in your trade business much more effectively:
1. Don’t mix business and personal expenses
Always maintain clear separation of your business and personal expenses.
Mixing your business and personal accounts can amount to problems with tax, personal liability and messy accounting records.
You must also not get caught up trying to secure your business finances with your personal finances, this will just create a mess that will eventually have to be dealt with.
Set a personal budget and business budget, and adhere to them strictly, and separately. Your book keeper and accountant will thank you too!
2. Pay your business bills on time
It’s important that you’re on top of things when it comes to paying your bills. Credit card and loan payment late fees will certainly cost you. But, constantly paying small late fees for suppliers and other bills will add up over time too.
Know your numbers, and ensure there are no bills getting missed. This one is absolutely essential for new trade businesses. Profit margins are already thin due to start up costs, so avoiding late fees could be the difference between ending the year in a profit or loss.
3. Negotiate with suppliers before signing a contract
When making purchases from or contracting with your suppliers, ensure you negotiate for a better deal. Go through purchase terms, like late payment penalties and grace payment periods, when making a decision to use a supplier. Sometimes being given an extra 30 days to pay an account will suit your trade business much more than a discount off supplies.
4. Be tight with your money
You don’t have to turn yourself into an extreme ‘tight ass’ to save money on ordinary business expenses. But use common sense, and snap up a bargain when you see one – eg buy furniture and major equipment second hand, if you can, or at least on sale. Don’t go throwing money away on items you don’t really need.
5. Learn about business accounting
Being a trade business owner unfortunately doesn’t instantly make you a genius with money. But, as a trade business owner, you do have to make big money-related decisions for your business. Even if you have a bookkeeper, and work with an accountant (which you should) you should know the basics of accounting for business. Take an Introduction to Accounting course online or at your community college if you need to, and learn how cash moves in and out of your trade business.
Be proactive, and hands on when it comes to managing your trade business finances. The more you understand the way money moves in and out of your Trade Business, and you know your numbers well, the better prepared you are to make smart money management decisions.
Interested in learning more about setting up your trade business financials the right way?
- Join our Kick-Ass Tradies Facebook Group, for access to trade business specific conversations, tips and resources, plus a like-minded community of tradies.
- Book a 15-minute Game Plan Call with Andy, owner of Dr. DRiP plumbing and co-founder of Lifestyle Tradie, to clarify your priorities and get clear action steps.