Let’s be honest – being a sole trader can sometimes feel like braving a storm with nothing but a sturdy raincoat (and on a good day, maybe some gumboots). Unlike big companies with strong cash reserves, sole traders are often at the very frontline of every economic rollercoaster. Think high cost of living, sky-high fuel prices, and ever-increasing inflation.
Many sole traders don’t have a financial buffer to absorb shockwaves – if times get tough, there’s nowhere to hide. But even when things are tricky, there is hope! Improving your cash flow is one of the best tools in your arsenal for weathering the storm.
We’ll walk you through what cash flow really means for sole traders, why it matters so much (especially in tough times), and practical steps you can take right now to improve it.
Grab your umbrella, and let’s prepare for the rain.
What is cash flow?
Cash flow is the incomings and outgoings of cash in your business. It’s not about profit or what you’ve invoiced, it’s about the flow of real, tangible dollars in your bank account, day to day. It’s the timing of money from client payments, grants, rebates, and sold equipment coming in, and payments for expenses, supplies, and loans going out.
To put it simply: Good cash flow is having enough money on hand for bills when they’re due, so you’re not scrambling for coins under the couch cushions. Without it, even a profitable business can hit the rocks if there’s not enough cash in the bank to keep things ticking over.
If your cash dries up, it’s not just stressful – it can also damage your credit rating, strain relationships with suppliers, and make it harder to get fair payment terms in future. This isn’t to scare you, it’s just to say: keeping cash flowing regularly is critical for keeping your business happy and healthy!
📖 If you’re after a deeper dive, check out our detailed article all about cash flow.
So now you’ve got a primer on what cash flow is, what can you do to shore up yours? Unsurprisingly, it comes down to three things: optimising your inflow, managing your outgoings, and building up a buffer to cover tight times.
Optimise your inflow
Cash flow is all about timing – but it can also be about how much cash is flowing through your business. With that in mind, here are a few things you can think about to optimise both.
1. Manage client payment times (as best you can)
We know – chasing up invoices is literally nobody’s favourite part of the job. But it goes without saying that the sooner you get paid, the easier it is to plan and budget!
When invoicing, there are a few tips and tricks that can help you get paid on time:
Set clear expectations upfront: Don’t leave payment timelines up to fate (or your client’s memory). Ask clients, “When do you expect to pay me?” Pop the answer in your contract, and put a due date on your invoices.
Avoid late payments: Consider adding a small late fee (for example, 5% of the invoice) if payment’s late. It sounds harsh but, trust us, people magically hit deadlines if there’s a fee at stake! No one wants to pay more than they have to.
Let Hnry help: With Hnry Invoices, invoices are chased up automatically (and politely!) – no awkward emails from you required. Our data shows that, on average, sole traders with Hnry get paid a glorious eight days faster. That’s eight fewer days waiting anxiously for your money, and more time for literally anything else.
2. Raise your rates
We get it: Nobody loves putting up prices, especially when everyone is feeling the pinch. But your cost of living has gone up too, and you’re running a business.
A few options:
Raise rates across the board
Sometimes, it’s simply time to update your prices. Costs go up, your skills grow, and your business needs to keep pace with the market. Raising your rates across the board can feel daunting – after all, nobody wants to give long-term clients sticker shock. However, think of it as keeping your business sustainable, not just profitable.
Your customers expect that rates may increase occasionally (it happens everywhere from the supermarket to Netflix). It’s one of the most straightforward ways to boost your incoming funds and make sure you’re getting paid what you’re worth.
Offer service or product “bundles” for better value
Bundling can be a win-win: Your clients get a deal, and you get more predictable, upfront cash flow.
For service providers, this might look like a freelance graphic designer offering a Business Starter Bundle: logo, social media banners, and letterhead at a flat rate, instead of charging à la carte. This encourages clients to spend a bit more to get greater value, while locking in a larger project for you.
For product-based businesses, imagine a candle maker selling a Seasonal Scents Trio for a lower price than buying three individual candles separately. Bundles move inventory, increase the average sale value, and help even out your income between the busy and slow patches. Plus, they give you a chance to upsell in a way that feels helpful, not pushy.
Some extra tips:
Reward prompt payers: Consider a small discount (for example, 2%) for clients who pay early. Just make sure you’re not accidentally losing profit – any early payment discount should be factored into your new rates.
Communicate changes clearly and with empathy: Most clients understand that sometimes, costs go up. If you let them know ahead of time, it’ll help them manage any changes on their end. You can even add a dash of personality such as “We’ve held rates steady for three years, but as you know, even the price of coffee has gone up…”
Remember: your clients value your work, and you deserve to be paid fairly and on time. The hardest part is often just starting the conversation.
Manage outgoings
Every bit less you spend is a bit more in your pocket. Here are some ways to cut back on your outgoings:
Bulk buy if you can: Can you stock up on supplies and get a bulk discount? For example, a freelance photographer might buy memory cards, batteries, and print paper in bulk to save overall.
Predict your expenses: Map out what’s coming in and going out on a calendar or spreadsheet – it takes the surprise out of bills that you may have to scramble to pay, and helps you see when you might have a shortfall or a buffer.
Cut unnecessary costs: Are you still paying for that fancy PDF editor you used twice last year? Go through your subscriptions – you may have annual fees on automatic renewal, or be paying monthly for stuff you just don’t need anymore. Can you make do with the free option instead of the paid one? Or get a better deal elsewhere?
Be particularly mindful of subscriptions where you’re charged in other currencies. If you’re paying in US dollars and that exchange rate just keeps creeping up, you’ll be paying much more in Australian dollars than you originally were when you first took out the subscription. Are there local products you can switch to, so you have a predictable spend each month or year? If not, don’t be afraid to ask overseas suppliers for a better deal, especially if the Aussie dollar’s taken a hit.
💡Tip: Sometimes when you go to cancel a subscription, a provider may offer you a special deal to entice you to stay.
Automate your admin: Free up your precious time (and brain space) by letting Hnry take care of your taxes and financial admin. Imagine an evening with zero paperwork – absolute bliss! As a financial admin app specifically for sole traders, we automatically sort your taxes for you, so there are no nasty cash shocks at tax time.
Build a buffer
Building up reserves can take the stress out of quieter periods. A few things you can do:
Save for slower months during busy seasons: When times are good, squirrel away a bit for when they’re not. Even a small “rainy day” fund can make a world of difference when business is slow.
Get paid in advance, or split payments: Depending on your industry and relationship with clients, asking for a deposit of 50% upfront can work well for project-based jobs. For example, a website designer might take 50% upfront and 50% on completion.
Spreading out your earnings can help your cash flow stay positive, rather than relying on one big payment to hit your bank account when you need it.
Short-term loans (with caution!): These can bridge a gap when you’re in dire need, but don’t lean on them – always check the interest rates (some can be massive), repayment timelines, and make sure you’re not creating a new problem just to solve a short-term cash crunch.
Hnry does your taxes (and so much more)
Cash flow management doesn’t have to be a constant uphill battle. Hnry’s here to take away your financial headaches by automating your taxes, tracking your invoices, and letting you track your business performance at a glance.
Being a sole trader is tough enough. Hnry genuinely has your back, so you can spend less time stressing about cash flow and more time doing what you love. And maybe even take a weekend off. (Wild, right?)
If you’d like support in keeping your cash flowing, as well as no more surprise tax bills, check out Hnry. Because you deserve a business solution designed just for you.