23 Nov Small Business Finance Tips

We know finance is a source of worry for many small business owners so we’ve teamed up with small business finance experts, CGB Associates, based in Thirsk, North Yorkshire, to offer some top tips for managing your small business finance:

• Use technology to your advantage and be ready for the new digital era of reporting to HMRC:
  • Modern cloud accounting software such as Xero or Quickbooks can help you see how your business is performing in real-time.
  • Linking up EPOS systems, payment processing, payroll, stock control and much more can be done all in one package. This will save you time and reduces errors.
  • HMRC will be mandating all VAT registered businesses to report to them digitally from April 2022, with the majority of non-VAT registered businesses reporting digitally from April 2023.

• Work out a routine for record-keeping so you always meet filing deadlines:
  • Stay on top of paperwork by working to find a simple, easy to keep routine.
  • Missed filing deadlines (especially HMRC) usually incurs penalties for late filing and interest charges for late payment. Errors are often made when under pressure to file information and errors can be costly.

• Keep business records for a minimum of 7 years:
  • Businesses must keep their records for a minimum of 7 years. Bookkeeping & accounting records are key if HMRC want to look into anything. Things can be kept in paper or digital format.

• Keep things simple:
  • Simpler processes make it easier it is to keep track of everything and be proactive.
  • As your business grows, things may become more complicated as the number of processes increase. Building upon simple and solid foundations developed reduces the risk of errors and the potential loss of profits and cash.

• Working with a good accountant should be seen as an investment in your business:
  • Yes accountants come at a cost, but they can be very helpful for your business. They may be able to save you some tax, help you plan and structure your business for the future and be timely and proactive in giving advice.
  • Seek out recommendations for an accountant. People are always willing to share good experiences.
  • Be open and honest with your accountant. They can only help you and your business develop when they know all the details.

• Business structure is an important choice that needs some thought:
  • Ltd company may save some tax and provide some protection for you if things go wrong. However the reporting requirements are more challenging with company format accounts to be submitted to Companies House and Corporation Tax returns to HMRC. Often a payroll scheme is needed too to pay yourself a salary and dividends can only be paid from profits after tax.
  • Sole traders & partnerships have more freedom with how money can be taken out of the business. There may be slightly more tax to pay than a Ltd company but you don’t have to send your accounts to Companies House for everyone to freely scrutinise.

• Keep an eye on your 12-month turnover:
  • Generally if your turnover goes over £85k in a 12-month period, you will need to become VAT registered. Register late and you could incur a penalty from HMRC.
  • Planning for post-VAT registration is important. Remember sales will become more expensive to some customers when you have to add VAT onto your sales prices.
  • There are choices when you become VAT registered including the cash accounting scheme and flat rate schemes. Picking the right VAT scheme can save you money in the long run.

• If things go wrong, being an ostrich and putting your head in the sand is the worst thing you can do:
  • Suppliers are often happier to discuss options around extra time to pay or payment plans if you talk to them before the payment becomes due. Be honest with them and try to come to a compromise that you can meet.
  • Never leave things too late if you are struggling to pay taxes to HMRC. The sooner you speak to HMRC, the likelihood of being offered time to pay the liability will be increased.

• Invest in your business and save for your tax:
  • Take the mantra of invest in your business. This could be buying new assets for the business and the correct purchases could help reduce tax that you may have to pay.
  • Always save for your taxes. Open up a savings account and try to put some cash away from every sale to put towards your taxes. Try to not keep dipping into the savings pot for normal expenditure.

• Keep planning for the future:
  • The majority of successful businesses plan for the future and continuously develop these plans.
  • Don’t fixate on old financial data. Use the information to look at trends and develop your plan. You cannot change the past, but you can develop your future strategy.

Thanks to Guy and the team at CGB Associates for these helpful tips!