What is it?
Effective financial management is crucial for running a sustainable independent support worker business. This lesson covers tracking income and expenses, budgeting and keeping accurate financial records.
Whether you’re just starting out or have been running your business for a while, understanding these basics helps you stay organised and in control of your business’s financial health.
Why it matters
- Cash flow: Understand whether you can cover your expenses as they fall due.
- Tax preparation: Accurate financial records help you prepare for tax time.
- Business growth: Understanding your finances helps you make informed decisions about savings and reinvestment.
- Peace of mind: An organised system lets you focus more of your attention on providing support.
How to do it
1. Track income and expenses
Use tools such as Excel or Google Sheets to create categories for income and expenses. If you need more advanced tracking, consider accounting software that suits your circumstances.
Tip: Log business-related expenses, such as insurance, travel and equipment, alongside payments from participants. Keep supporting records so you can check the figures later.
2. Create a budget
Set monthly and yearly financial goals based on expected income and regular business expenses. Estimate income, track expenses and forecast what will be left after costs.
Include categories for:
- Business expenses, such as insurance, marketing and materials.
- Tax savings.
- Money you need to take home.
- Savings for reinvestment and business growth.
Remember to account for quieter periods, administration and time away from paid support work.
3. Understand tax basics
As an independent business owner, you are responsible for your tax obligations, including income tax and GST where applicable. Set money aside regularly so you are prepared.
The original guide suggests saving 20 to 30 per cent of income. This is only a rough budgeting example. The amount you need depends on your income, deductions, business structure and other circumstances. Ask an accountant to help estimate an appropriate amount for you.
4. Reinvest in your business
As you grow, consider upgrading equipment, pursuing further qualifications or marketing your services. Set aside a portion of income for planned improvements where your budget allows.
Reinvestment should fit your needs and available cash. You do not need to expand before you are ready.
What you will need
- A budget you can review and adjust.
- A record of income and expenses, with supporting documents.
- An understanding of your tax obligations.
- Regular time to review the figures.
You can create your budget in a spreadsheet or use your accounting tool.
What to expect
Allow a few hours to set up your system, followed by 30 minutes to an hour each week for routine records. Budgeting and forecasting may take another hour or two each month.
Use these as planning estimates and adjust the routine to suit your business.
Illustrative example
Rachel struggled with managing her finances until she began logging business expenses and participant payments. Seeing insurance, training and travel costs alongside her income gave her a clearer picture of cash flow. She could then plan tax savings and future purchases more confidently.
Common mistakes to avoid
- Missing small expenses: Everyday costs can add up over time.
- Not budgeting for taxes: Leaving everything until tax time can create unnecessary pressure.
- Spending everything you earn: Allow for future expenses, savings and time away from work.
FAQs
How much should I save for taxes?
There is no single percentage that is right for everyone. Use your actual circumstances to estimate it, with professional advice where needed.
Should I hire an accountant?
Consider the complexity of your finances and your confidence in managing them. Accounting software can help organise records, while an accountant can advise on your specific obligations.
Action steps
- Set up a budget and an income and expense record.
- Plan a regular time to update your figures.
- Estimate and set aside money for taxes.
- Review your budget as your business changes.