Life can be very busy when you’re running your own sole trader business. Most if not all of your time each month can get taken up by making sales, keeping your customers or clients satisfied and trying to attract more. All are vital tasks, of course.
But often the financial stuff gets neglected, possibly because you don’t enjoy doing it because, let’s be honest, it’s pretty dull. But if you don’t stay on top of managing your business finances, sooner or later, it will prove disastrous.
Now for the good news. You don’t have to become a bookkeeper or accountant. All you need to do is take care of a short list of financial essential tasks each month and your business should be in good financial health. And it need not take a lot of time. So, here’s a handy checklist of essential financial tasks that you should be ticking off at least each month
1. Chase overdue invoices
If you grant credit, your customers should pay you when invoices are due. Some tact and understanding is required (they could be waiting for payments), but your number one priority must be to keep your cash flow healthy.
You should have a system that tells you when an invoice is due, so you can remind your customers/clients. As soon as it’s overdue, contact them to politely request immediate payment. Don’t let days, let alone weeks, go by. Every month, make sure all unpaid invoices have been chased up and find out from customers/clients when payment will be made.
Did you know? You can claim interest (ie 8% plus the Bank of England base rate)for B2B transactions and debt recovery costs if another business is late paying you.
2. Make sure all of your invoices are sent
Delay sending your invoices to customers and this will also place an unnecessary strain on your cash flow. As soon as you’ve supplied the product(s) or service(s), send your invoice. Make this a habit that you never break. The sooner you send your invoice, the sooner you’ll get paid and the better it will be for your cash flow. Never let the end of a month come without making sure all of your invoices have been sent.
Did you know? You can use Coconut to send branded invoices in seconds and keep track of payments, so you know when they’ve entered your bank account.
3. Fully update your financial records
Accounting software can be linked to credit card and business bank accounts so that when your business is paid or buys things, it’s automatically accounted for in your financial records. This makes updating your financial accounts really simple. f you buy things with cash or accept cash payments, these, too, must beentered into your financial records. You need to stay on top of this, so that you do not lose track.
Good accounting software makes things much easier by recording and categorising expenses. Alternatively, make sure all purchasereceipts for the month for business expenses are stored in an organised way. HMRC can ask to see proof of your allowable businessexpenses. Also, if applicable, fully update your journey/mileage records for the month.
Did you know? Making Tax Digital will be introduced from April 2026 and it will make updating your financial records regularly more important than ever, because sole traders and landlords will need to report their income and costs to HMRC every quarter.
4. Pay your creditors on time
Your creditors are the suppliers, businesses or people that you owe money to. Naturally, you want to get as much credit as possible, because delaying payment is better for your cash flow. But becoming a habitual late-payer can soon start to erode supplier goodwill. It’s better, where possible, to pay your creditors on time. You can save yourself time, of course, by automating regular monthly payments to suppliers.
5. Assess your monthly income
Each month, also take time to consider how much income you’ve earned. If you use accounting software, this is very easy to do. Is your monthly income more or less than the corresponding month last year? How does it compare to other months this year? Whether your monthly income is up or down, work out why and whether you’re on target to achieve your annual turnover target. If your income is down, decide what you’re going to do to get back on track.
Top tip! Regularly assess your prices and profit margins. Never consider either to be fixed, because you may be faced with cost increases.
6. Also look at your monthly costs
Also assess your monthly costs. Again, accounting software makes it remarkably easy to look at costs across your business in all areas. Are your costs more or less than the corresponding month last year? What about other months this year? Why might your costs have gone up or down? How does your spending compare to your monthly budgets? Do you need to reduce your costs in some areas? Is it time to search for new suppliers that give you better value for money?
Top tip! Minimising your costs must always be a top priority, but that doesn’t necessarily mean going with the cheapest supplier. Focus on value, not price.
7. Check your tax compliance obligations
Make sure you know when your tax payments are due (hopefully you’ve been putting enough away to pay your bill) and make sure that you know how long you’ve got until your tax return(s) must be filed. Obviously, you want to avoid any late-filing or late-payment penalties, and you want to avoid any other compliance issues.
Top tip! You don’t have to wait until December or January to fill in and file your annual Self Assessment tax return, you can do it anytime after the UK tax year ends on 5 April. Get it done as soon as you can.
Each month, you should have a reliable idea of the overall financial health of your business, whether things are going well or not. Creating cash flow forecasts can help you to identify times when your business risks running out of cash, which can prove a fatal error. Creating reports that tell you how well your business is performing is very easy if you have the right accounting software. Reports can reveal a lot about how your business is really performing, because the numbers don’t lie.
