Self-employment – how to stay on a firm financial footing

When starting a business on your own for the first time, it can be very different to doing an ordinary job in a typical office for reasons good and bad. On the plus side, you exert total control on what your new venture does, but you find yourself burdened with extra responsibilities such as meeting all clients and monitoring income and expenditure closely.

For a handful of new business owners, financial management is often the most difficult task. Not only do they have to make sure they have enough money to pay for everything from stock and stationery to computing and furniture, they also have to make sure they have access to money when it’s needed to pay an outstanding bill or for something relatively small like fuel or a train ticket.

Putting extra money aside

Before you begin trading, one thing every start-up business should have is liquid assets. This means that, for just about any purpose, having a little money set aside as a back-up. For emergency situations, financial liquidity is absolutely necessary, but it can also be useful for when the business is growing and needs extra capital to finance spending on extra office space or something similar.

The money stored doesn’t have to be a huge amount. Something in the region of a couple of thousand pounds will be sufficient for most purposes, but in a year or so, if in profit, adding to it is advisable in case of spending on future expansion.

Ideally, this extra money should be stored in a secure savings account where 24/7 access is possible. Until recently, such products were rare as most banks and building societies didn’t offer them, but with the advent of the ISA, this has changed almost immeasurably, with businesses as well as individuals feeling the benefits.

ISAs the best option?

ISAs are saving accounts which, are on offer from banks and building societies, are either tax free or tax efficient ways to save money. Interest rates are typically higher than those for standard accounts, but access to money is restricted for most of them. According to, certain accounts such as cash ISA’s have lower interest rates, but you can access your money as and when, whilst fixed rate ISA’s have a higher interest rate yet access to your money is limited with penalties to your ROI. It should be also noted that the amount that can be invested in an ISA per year is also limited.

Fortunately, that’s not the case with so-called ‘cash ISAs’. Unlike regular ISAs, they can be accessed online at just about any time of day, which is handy if you need some money quickly. Although the interest rates for cash ISAs tend to be lower, they’re still pretty attractive, especially to small businesses who are in it for the long-haul.

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