By Tkay Nthebe
With the high unemployment rate in the country, Basotho are actively starting businesses (whether registered or not) to earn income. Though inspiring, the challenges of running a business (goods or services) should not be taken lightly. These include (but are not limited to) managing operational costs, keeping good records, maintaining good customer service, and lately dealing with the impact of COVID-19. Self-employed people and/or Freelancers are often required to be the master of all trades for their businesses, to ensure things are done correctly to keep the business afloat – from the Managing Director, sales, operations, marketing, and finance.
I’ve had the privilege of speaking at several youth entrepreneurship skills development programs on the importance of financial planning. The key takeaways from the sessions, including my own personal journey as a Freelancer is that “cash is king”, especially when economic activity is low. In this article, I want to share four money management strategies that will benefit those who are self-employed or freelancing.
- Managing your pipeline
Sales are the bloodline of any business whether you are selling goods or providing services. Having a healthy pipeline which compromises of prospective customers, new business and existing customers cannot be overemphasised. It is key to know who your customers are, which deals you will be closing when and converting them into sales if you are to grow your business.
- Planning and saving for rainy days
The context and uncertainty in which your business operates can be a deal breaker. Understanding the cycle and trends of your sales influences how you plan and save for rainy days. Rainy days could be where sales are very low or a nationwide lockdown, but monthly expenses still need to be paid. To minimise the financial burden when sales are low, save at least 15% to 30% in an interest-bearing account.
- Building a relationship with your bank
The mistake many people make is to mix their personal and business finances (income and expenses). The recommendation is to separate your personal account from the business and ensure that all business proceeds are paid into the business account via ATM deposits or electronic funds transfers (EFT). By so doing, you can track the performance of your business and build a track record with your bank, which becomes beneficial later when you want to access credit facilities.
- Understanding the tax implications
Depending on the nature of your business i.e., Sole Trader, partnership or company, tax is an important consideration. The tax authority allows certain expenses as allowable deductions for tax purposes, which can reduce the amount of tax you should pay. Furthermore, people who are self-employed or freelancing have an obligation to comply and file their annual tax return. Consult the tax authority to understand the type of taxes for example Value Added Tax (VAT), Withholding tax (WHT) and Personal Income Tax (PIT) that applies to you.
“What do you need to start a business? Three simple things: know your product better than anyone. Know your customer and have a burning desired to succeed.” Dave Thomas.
Mohoma temeng bana ba thari e ntšo.
