You might be fancy and have software doing all sorts of analyses for you. But a lot of us with simple businesses can rest easier with even a little due diligence.

For instance, as a sole trader for many years Lucy didn’t do that much financial planning. But she always had an up-to-date spreadsheet covering things like:

• expected business and living expenses,
• mandatory tax obligations like sales and income taxes,
• voluntary pension contributions,
• income thresholds that would affect the entity*,
• and other more aspirational buckets for savings and fun stuff.

Most important for Lucy was maintaining a cashflow ‘safety net’ so she could operate while waiting for people to pay her. Hers covered about 6 months worth of living expenses.

Everyone’s safety net will be different. But Lucy learned quickly that having no safety net is stressful because nobody pays your invoice on the day you send it.

And the bigger the company, the slower the payroll department, which might be another thing to consider here.

*Such as ‘the 80/20 PSI rule’ and GST threshold in Australia.