Side hustling is common among young Africans. According to one report, 30% of young South Africans have a side hustle, to make extra money. For some, it’s a way to monetise their passions. For others, it’s a way to make ends meet.
To ensure the success of your side hustle, you need healthy financial habits. Start with a goal. Is this something you hope will one day become your full-time job? Or are you happy to keep doing it on the side of your current job?
When your finances are well managed, you’ll price your products and services right and accurately record expenses.
Here are four tips to better manage your side hustle finances.
Separate business and personal
It’s a good idea to keep your personal and business finances separate, even if you haven’t registered your company. With a separate bank account for your side hustle income and expenses, it’s easier to keep track of your cash flow. Doing your monthly finances will also be faster.
Be tax savvy
Maybe you haven’t thought of declaring your extra income with the revenue authority, or maybe you’re trying to avoid it. But SARS is getting stricter, especially with freelancers, side hustlers and informal traders.
This is where having a separate bank account will come in handy because you’ll have an accurate view of your income and expenses and, therefore, how much tax you’ll need to pay. You’ll need to complete a self-assessment process to declare your income according to standard tax tables. Keep this in mind when pricing your products and services.
Get good at record-keeping
The key to a successful business is having a good grasp on your finances. This is especially important when you want to deduct legitimate business expenses from your taxable income and stop your business from running at a loss.
Keep a record of all expenses, including:
- Raw materials
- Stationery, printing and marketing costs
- Software, hardware and other equipment
- Utility and phone bills
- Bank charges
- Travel expenses
- Wages paid to others
With a good understanding of all your expenses, you’ll find a good middle ground for your pricing – not too high that you price yourself out of the market, but high enough to make a decent profit. Look at your accounting data to understand if you’re charging enough and where you can charge more or add value.
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Cloud-based accounting software makes it easier to manage your side hustle finances. You can record income and expenses and keep track of your finances, from anywhere, on any device. You’ll also get insight into things like your busiest time of year and your most popular products or services – in an instant, without having to analyse a bunch of spreadsheets.
Stay on track
Good financial management is crucial for all businesses. If you can get it right in the side hustle stage, you’ll set yourself up for success if and when you go full-time.