So you’ve taken on a job, completed the work, and made sure the client’s happy - now what?
The good news is that it’s not that difficult to set up a solid, repeatable system that saves you time, money and effort. Here’s how to do it in three easy steps:
1. Get paid (faster)
Nothing tanks cash flow quite like late-paying clients. While there’s no real way to make sure they pay you on time, there are a few things you can do to speed things along.
Firstly, send your invoice on time – make sure they have all the details they need to pay you as soon as possible. It’s a good idea to build an invoice template pre-filled with your contact details and services, so you’re not doing this from scratch every time. You could even include due dates and late payment charges if you feel your clients need extra encouragement!
Secondly, chasing up an overdue invoice (politely!) can help keep you top of mind. As an example, sole traders who use our invoice chasing feature get paid an average of 8 days sooner – well worth the extra effort.
2. Set money aside
It’s not just income tax you need to cover – there’s ACC levies, and any student loan repayments you owe. While it’s a good idea to set money aside as you go, because of all the above, it’s not as straightforward as putting 30% of each payment in a savings account and crossing your fingers.
To figure out where to start, you can try plugging your numbers into a free online tax calculator (like ours!) to get an idea of what you might owe. Just be mindful that online calculators can only give you an estimate – they’re unlikely to be completely accurate.
If you’re a sole trader, you could also think about including voluntary KiwiSaver contributions as part of your calculations. You could really benefit from compound returns, as well as the government contribution!
3. Factor in tax deductions as you go
Hnry data shows that 49% of sole traders aren’t claiming everything they’re eligible for, with an average of $3,034 left unclaimed every year. That’s easy money left on the table!
The number one reason cited for not claiming their expenses is not knowing what they can and can’t claim. In general, an expense might be claimable if:
- You spent the money yourself (and weren’t reimbursed)
- It directly relates to earning your income
- You have a record to prove it (usually a receipt)
It does get slightly more complicated than that though, so it’s well worth doing your research on which business expenses you might be eligible for.
But once you know what you can claim, it’s worth factoring these expenses into your estimated tax bill as you go. Cash flow is the lifeblood of any business, and it’s way more useful to have cash to hand than locked away for taxes.
Or, you could just use Hnry
We sort all of your tax calculations and payments automatically, so you don’t have to think about it throughout the year. We also help you understand what you can and can’t claim - so you’re maximising your tax deductions.
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