It's time to stop talking about it and get the ball rolling. Let's work through the next few steps together to get your business ready to starting making some cash-money!
I have just started working with a new artist assistant who is magically working her way through all the admin work I keep ignoring. This is her first hustle since having her wonderful brood of kids. She is a contractor. What does this mean? It means that I don't employ her. I contract work to her. So when I have work, I get her onto it. Perfect for both our situations. I can call her in for specific projects, and as an artist, these projects are very sporadic. Her family life is also sporadic, so fitting bits of work here and there works for her. Perfect. BUT! Being a contractor is very different from a PAYG employee. A PAYG employee is employed, with a contract. The employer pays super and tax and offers a pretty regular working schedule. Contractors tend to make a higher hourly rate because they need to pay their own super and tax.
My wonderful assistant sent an email this week before her first invoice is due (so I can pay her cash-money! Whoo hoo!), asking all the questions. Great questions! So lets work our way through them...
Australian Business Number (ABN)
If you run a business, no matter the size, you need an ABN. An ABN is a unique 11 digit number that identifies your business to the government and community. It excludes you from paying PAYG tax, but that does not mean that you wont pay tax! Registering an ABN is FREE. Do not pay for this. There are a number of websites that will take your money and register your ABN for you. You can do it! It is simple. Make sure you are registering your ABN through the Government website here.
Business Name I strongly suggest you don't worry too much about paying for a Business Name at the moment. Your business name can be your legal name ie. 'Sarah Sculley'. This is FREE. As soon as you want to 'name' your business ie. Sculley Design you have to register it. This costs money. For now, use your name. If you want to register a business name down the track, you can easily add it to your ABN. For more information about registering business names (if you're really keen on your Fuzzy Peach Design Co name...) head over here.
Goods & Services Tax (GST)
If you are just starting out, you don't need to worry about GST. I strongly suggest you speak to your accountant or bookkeeper about this, but generally you don't need to register for GST until your income is +$75,000/yearly. I also suggest holding off on doing this. GST isn't fun. Quarterly you have to consolidate your finances, have a bookkeeper do some magical number thing and pop out an amount you owe to the Australian Tax Office (ATO). Then you need to jump on MyGov and pay the money to the ATO. That's always a bit depressing. So lets not priorities GST registrations just yet.
Superannuation
Yes! I'm so glad my assistant asked about this. It is so important, particularly for women to really think about their super. Check out my money post over here for more info. As a contractor, with your own ABN it is your job to pay your super. The super rate for 2022 is 10%. This means that 10% of your income should go into super. Notice how I said should? No one is going to hunt you down if you don't pay it... I don't think. I had a few years there (maternity leave and the following 2 years while I tried to get my business rolling) where I didn't get as much super in as I should have. Any contribution is better than none. If you can contribute 10% - brilliant! 2%, still good.
If you don't already have a Super account - apply for one. Canstar compares Super funds over here. I am with UniSuper from when I worked as a tutor at Queensland University of Technology. It's a top performing fund. Yay! Once you have your Super fund, log into your account and they will have instructions on how you can pay your own Super. For me it's a BSB and Account number that I transfer money into. I put aside 10% of my pay each week and I bulk transfer into my Super account at the end of every quarter when I do my Business Activity Statement (BAS) to pay GST.
Tax
One of the first bits of advice I give to people starting their own business is 'put money away for tax EVERY TIME you get paid'. I put away 30% of everything I earn. I suggest if you are just starting out and expect your income to be $45,000 or lower, put away 20%. My tax account is an offset account attached to my home loan - so as my tax money builds it offsets the home loan. An alternative to this is to set up a high interest account and throw your tax money in there. Have a look around as to which banks offer free accounts with high interest. Me Bank and ING are my favourites.
Now I put away 30% of everything I earn BEFORE I take out my expenses (ie. Paint, assistant fees, lift hire). Not just 30% of my profits. This means when tax time rolls around I get a pretty decent chunk of my tax savings back. It's a great way to save money AND feel financially safe.
At the end of financial year I suggest having a bookkeeper pulling together all of your receipts and expenses and income and doing your EOFY tax return.
Tax File Number
You have one. What do you do with it? Well, you are your own boss now! So you don't need to hand your TFN out or fill out those PAYG forms. You will need your TFN to apply for an ABN, but that's it! You got this boss!!!
Getting that money
This depends what type of business you are running but I suggest you do a few important things here when it comes to money:
Open a business bank account with it's own keycard. Even if it's still in your name (not a business registered name), it's still so important to have a seperate account. This will make EOFY so much easier, I promise. All the money you make goes into this account and any business expenses comes out of this account. Easy. I even have a pretty little sticker I put on my business keycard so I don't get it confused with my personal card. This was the highlight of having a business card - the pretty sticker.
Open a Paypal account. If you don't already have one, open one up. Link this to your business account so you can take payments via paypal or make payments this way. People love using paypal as they have insurance and will refund money if you get duped - this happened to me once when I tried to buy an automatic cat poop scooping litter tray. You can also generate invoices in Paypal to get yourself paid. Link Paypal to your online web store or use their little Square device to take in-person card payments.
Use an invoicing program. If you're not keen on getting paid through Paypal and would prefer cash in your bank account, you can start out by using a online program such as Wave. This is a free program that generates invoices. Make sure your bank details are on the invoice and they will flick it out to your client for payment. When I first started, programs like this didn't exist. So I would design every invoice in Adobe Illustrator and it was so painful. I fork out money and use 17hats because I love their 'if this, then that' processes, their contracts/signatures and the whole thing is so easy to use. I have a coupon code for 17hats for 10% off if you were thinking of joining: rrtgnswhkn I also use Quickbooks because that's what my bookkeeper prefers. It makes life easier. These are both paid programs.
If you have gotten this far in the blog post - well done you! Business admin can be a little... boring. But you did it! If you have made it this far, I strongly suggest you further your money education by reading the following books which I have found really helpful in growing my personal/family wealth:
The Barefoot Investor by Scott Pape
Girls that Invest by Simran Kaur
I think I have covered all the basics. Let me know if there is anything else that could be added to this list. Now, let's go out and make that money!
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