The end of a tax year is a good time to reassess your business and in particular, your finances. It’s a natural turning point, where you can make any changes before the new tax year starts.
Read our seven tips to help you revamp your finances, ready for the new tax year to start.
Think outside the box when it comes to funding
While banks control much of the business finance market, they’re not the only option. It can be difficult for small businesses to secure funding from the bank. If you’re looking for money to invest in your business, there are other options to investigate!
What other funding is available for my business?
Not all funding types will suit your particular business, but do some research into what’s available. Independent websites like British Banking Insight or the FSB’s online funding platform can help you find suitable options. You might also consider crowdfunding, or peer-to-peer lending.
Local authorities and local or industry-specific business groups sometimes offer loans and grants too.
Tackle cash flow issues—especially late payments
Overdrafts and credit cards can be useful as a buffer, especially in the early days of your business. Like all lines of credit though, consistently relying on or exceeding credit limits will soon rack up significant amounts of interest. Nobody wants all their profits to go on paying it off. It can also harm your credit rating, and your chance of getting funding in future.
If you have a lot of credit, start looking at what you can do to tackle it. Having a proper plan in place will help you deal with it, before it becomes a larger problem.
How can I protect myself from late payments?
Late payments can cause considerable cash flow problems for small businesses. To minimise the risk, check the financial background of customers asking for credit or placing large orders.
Make your payment terms and the penalties for not meeting them clear on all contracts and invoices. You can charge both a debt reclamation fee and statutory interest on unpaid invoices; the FSB have a guide for calculating this.
Invoice swiftly, and send a reminder before the due date, and another immediately after the due date if the invoice remains unpaid.
Having accurate, real-time financial data about your business helps you better react to opportunities, and make the right decisions for your business.
Getting a clear idea of your current financial position should simple, not a weekend spent searching for receipts and invoices!
How can I keep my accounts up to date?
Filing your paperwork regularly is essential. We know you have other things to be getting on with, so look into digital accounting software that can do the heavy lifting for you.
Opt for a cloud-based service, and you’ll be able to access real time financial data anytime, anywhere you have an internet connection.
Plus, with Making Tax Digital on the horizon, keeping digital accounts is a prudent move!
Don’t spend ‘spare’ cash
If you’re just starting to make a profit, resist the urge to spend it all on the business or pay yourself a bonus.
Keep something back for surprise expenses such as equipment failure – and expected expenses like your tax bill!
Only think about putting profits to use when you have a very comfortable financial buffer.
Cut your costs
It’s amazing how many business owners will search for the best deals on personal bills, but not on business ones. An hour or two researching the best deals for your business could save you hundreds, even thousands, of pounds.
Mark renewal dates in your diary so you can review contracts and prices before they auto-renew. Most companies won’t offer you their best deals or cheaper alternatives if you don’t ask!
A smart meter will help you keep an eye on energy consumption can be useful, as well as using energy-saving alternatives.
Have personal and business budgets—and keep them separate
If your business is new, hopefully you’ve done your research on any costs you foresee. When you’re running an established business, you might have an idea of what costs to expect.
In either case, use this information to create monthly and yearly budgets for your business. It will help you avoid overspending, hopefully so that there are funds available for marketing, or investment in new equipment.
However tempting it may be to buy big-ticket items for your business using your own money, pause. If this is a regular occurrence, either your start-up capital wasn’t realistic, or you’re spending more than you should!
It’s worth ensuring your personal credit score and finances are healthy though. Potential investors may want to see the personal financial status of directors or partners in a small business.
Review your business plan
A long-term business plan is never set in stone, as none of us can see the future. Circumstances, staff, costs, the economy and markets change, which means your business plan will need to as well.
Review your business plan and see if it’s still appropriate for the needs and present position of your business. If your business has done significantly better or worse than you expected, it will need a rewrite. Consider what’s working, what’s not, and how to expand and capitalise on successes.
Your business should feel financially healthier after a check-up, but don’t let things slide. Keep an eye, and a tight rein, on your finances, and review the financial position of your business throughout the year, not just at year end!
Subscribe to our newsletter to get accounting tips like this right to your inbox
About The Author
I'm an AAT and ACA qualified Chartered Accountant with over 13 years experience working with businesses, contractors and sole traders. I also love watching live music, and quizzes!
Learn more about Dean.