Covid-19 has caused a health and financial crisis across the world like never before. And with countries all around the world stepping up restrictions, things are looking more and more uncertain, especially if you’re self-employed.
Over the coming months, you may be faced with watching your income lessen or dry up entirely.
To help, I’ve put together some money advice specifically for the self-employed and sole traders to help you get through this period of uncertainty caused by the Coronavirus.
The Covid-19 situation is changing every day. I have based this article on advice that is currently available and will update it as more is released.
Estimate Your Self-Employment Earnings for the Next 3 Months
The government are suggesting that the Covid-19 crisis could affect us for the next 3 months.
It could be longer.
The starting point for managing your finances over this time is to firstly establish what you think you will earn over the next 3 months.
Start by reaching out to your clients and find out what their plans are while they self-isolate.
Where possible, be proactive and suggest solutions for working remotely so you can continue working from home, while we are all self-isolating.
Put together a Business Budget for the Next 3 Months
If you don’t have a business budget, now’s the time to do one.
You need to get a handle on your upcoming income and expenses as the starting point for managing your money.
Being self-employed you should do two separate budgets – one for your business money and one for your personal money.
In my step-by-step guide to creating a business budget, I’ll show you how to create a one with a template that you can work along with & keep.
Cut Out Non-Essential Spending
Take a look at your business spending and cut out anything non-essential.
We don’t know how long we will be affected by Coronavirus so my best advice to you is to do all you can to preserve your cash during this unpredictable time.
Commit to stopping all non-essential spending in your business.
Even if you see a great deal, if it isn’t essential and you won’t need it in the next 3 months, do not buy it.
Start Building an Emergency Fund
Once you have cut out non-essential spending, tuck away any excess money away in an emergency fund.
That way you’ll be extending the time you can cover your bills while your income is affected by the Covid-19 crisis.
Use an instant access deposit account so it isn’t in your current account. That way you’ll avoid the temptation to spend money.
Chase Your Clients for Outstanding Payments Now
If anyone owes you money, start chasing for payment now.
If any of your clients have contracted Coronavirus they will most likely not be able to work and won’t be making any supplier payments.
Get in touch with them now and ask for any outstanding bills to be settled.
Reduce Your Costs
Once you have completed your business budget, review your essential and non-essential costs.
Look for things you can avoid paying for or you are wasting money on like:
- Unused subscriptions;
- Outsourced tasks that you can do yourself (especially if work is quiet for you);
- Unnecessary marketing especially if your customers aren’t spending money at the moment;
Stick to Your Work Schedule
Even if you usually work from home, if you have family self-isolating due to Covid-19 it’s going to create distractions and disrupt your normal work routine.
Set up your workspace and working hours then communicate clearly to your household what these are.
That way, even if your income is not affected by the Coronavirus crisis, you can continue to work and earn money.
What to Do If You Can’t Pay Your Bills
If you are self-employed and cannot pay your bills then there are some things you can try to ease the financial burden until you get back to work.
If You Can’t Pay Your Suppliers
If you have any upcoming supplier payments and have doubts about whether you’re going to be able to pay your debts, reach out to them as soon as you can.
Remember when you are self-employed you are personally liable for your business debts. So don’t default.
Ask for a payment plan or tell them there will be delays with paying them but reassure them that you intend to settle what you owe.
If You Can’t Pay Your Taxes
HMRC who have promised to be more lenient about tax payments during this time.
If you have concerns you won’t be able to make your tax payments, including payments on account that are due on 31 July.
Call HMRC on 0300 200 3310 to talk to them about your tax payments.
Don’t Take Out Debt, Unless Absolutely Necessary
For some sole traders and gig workers, the sad reality is that their income is going to dry up.
That means they are going to have to take out debt to get them through like credit cards and short-term loans.
It’s totally understandable and you need to take whatever actions necessary to get through this.
Just make sure you have a plan as to how you are going to repay the debt once the Coronavirus Crisis passes.
Please don’t run up debt for anything non-essential.
Find new income streams
It’s time for us self-employed folks to think outside the box.
What other services or skills do you have that you could make money out of from home?
Maybe you could start a blog, list yourself on freelancing websites or offer your existing clients a new product or service.
If you are self-isolating and have some spare time have a think about what you could do to earn some extra cash.
Discount Your Products and Services
My inbox is exploding with special offers and people trying to tempt me to spend money.
You could do the same if you sell digital or physical products.
Offer discounts on your products and services to entice them to buy. That way you still get some cash into your bank account, even at discounted rates.
Claim Government Benefits
Under new government measures, changes have been made to the benefits system to make benefits more accessible to the self-employed during the Covid-19 crisis.
Depending on your circumstances if you are self-employed you may be eligible to make a claim for:
- Employment and Support Allowance (ESA)
- Universal Credit (UC)
Read more about claiming benefits and how to contact HMRC.
Improve Your Business
Finally, even if you have an emergency fund or have enough work to carry on throughout the crisis you could take advantage of the quiet time to make improvements to your business.
Whether you’ve been meaning to work on your social media, take a course or get your finances in order, now is a good time to do it without distractions.
You’ll come out the other side of the crisis even stronger and more organised.
Covid-19 is affecting everyone’s income in some way whether employed or self-employed.
We are in the middle of a worldwide crisis which is changing daily and it is virtually impossible to predict exactly how long we will be affected and the true impact on our lives moving forward.
Putting together a business budget is your first step to managing your money. It is time-consuming! But you’ll get a lot of value out of it.
You can also use my template and guide to plan your personal finances out too.
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