You’re an entrepreneur with drive and ambition, whose taken that leap of faith into the world of business – Congratulations! It’s a really brave thing to go it alone.
With growth comes responsibility and also sleepless nights. Over the years we’ve worked with hundreds of businesses at every stage of their development so we kinda feel pretty qualified to list the most common problems but also (because we’re a positive bunch) the solutions so you can read, digest and rest a little easier when your head hits the pillow at night.
The Problem – Cashflow
This has to be up there at the top as it causes more loss of Zzz’s than anything else we know.
With growth there are many decisions to be made and often times we see what can
only be described as a rollercoaster ride of peaks and troughs in cashflow, the feast and famine cycle we call it. It’s stressful, it’s worrying and can be prevented.
Keep up to date, real time financial records of all your income and outgoings so you know EXACTLY at any given time what is happening in your business. From this up to date information you can do regular cashflow forecasting which is super effective at giving you a heads up of any potential trouble ahead. Forearmed with that knowledge you can then contact suppliers and let them know that payment will be delayed but that they will receive it – this is powerful as it keeps your relationships healthy and ultimately in the future could get you better payment terms.
Do not delay your own invoicing either, have a system that allows you to create invoices, with your payment terms on them, no matter where you are (ahem we love Xero) and also track any potential late payers so you can chase them up as soon as they become due.
The Problem – VAT & Tax
Let’s be honest here. Our tax system here in the UK is undeniably complicated. Despite HMRCs apparent attempts to simplify things, it’s oh so easy to fall foul of the law through lack of knowledge and experience. Getting it wrong attracts late filing penalties, additional interest payments and a whole heap of stress.
Here are the top 5 taxes that business owners should be aware of:
Income Tax – Income Tax is a tax you pay on your income. You pay tax on things like: money you earn from employment, profits you make if you’re self-employed – including from services you sell through websites or apps.
Corporation Tax – You must pay Corporation Tax on profits from doing business as a limited company.
VAT – You must register for VAT and also Making Tax Digital if your turnover is
more than £85000*
NOTE: It’s calculated on a rolling basis, so you’ll need to monitor your taxable turnover for a rolling 12 month period, not just in the current tax year
National Insurance – is not technically a tax but must be paid to the government by all businesses.
You usually pay 2 types of National Insurance if you’re self-employed:
Class 2 if your profits are £6,475 or more a year*
Class 4 if your profits are £9,501 or more a year*
*For year 2020-21
Business Rates – are a tax on office or retail based businesses, similar to council tax but for business properties.
Even IF you have the knowledge to be able to DO the taxes above, is it really a good use of your time and something you actually enjoy doing? Our experience with business owners over the years is that they would much rather be focussing on the future plans and growth of their business and doing the things they love.
The Problem – Pensions
Maybe you worry about your own pension provisions but there are other’s to consider too if you employ staff. If someone you employ is entitled to automatic enrolment to a workplace pension scheme you, as their employer, have to provide a scheme and make contributions to it. The Pensions Regulator can issue escalating penalty notices of up to £10,000 a day. And ultimately you could face criminal prosecution and even imprisonment.
Firstly check which of your staff are required to be enrolled into a pension scheme. You assess them based on their age and income. Staff have the option to opt out usually within the first month after enrolment.
The information must then be submitted to the Government Pensions Regulator. Here’s where it pays to get some help then you get to enjoy a good night’s sleep.
The problem – Access to Finance
There are points when growing a business when additional finance would be useful and even though our banks and lenders have been reprimanded in the past for being too strict on lending to small businesses it doesn’t look as though things have changed too much over the past few years.
That said, your business is far more likely to be successful in securing additional funding if your bookkeeping is up to date and your finances in order. There is sadly little chance of anyone lending to you to fund growth or anything else if your finances are in a pickle. Don’t leave it to chance as it is incredibly frustrating when you reach a point of expanding your business, needing to buy new equipment and then, when you apply …. Computer says no.
As if you were going on a super hot date .. make yourself attractive (no not in that way!)
As a business you need to be clear about WHY you need the money, how it will help your business and where it will be spent. It’s important to communicate this to any lender.
Check you are applying for the right loan for your requirements and that you are getting the best deal possible. If you can match these to your business you become a much more attractive prospect to any potential lender.
Get help from people who know how to present this information as the better your business looks on paper, the more likely you are to get that loan.
The problem – Growth
Now you didn’t see that coming did you?
Seriously, the growth of a business keeps business owners awake more times than I care to remember. The worry and sleepless nights are normally due to a lack of knowledge ie, not knowing how their business is performing right now or a lack of systems and processes and then because they are stumbling around in the dark so to speak, they’re not sure if they can afford to take on new staff, new premises, increase product lines OR what impact it will have on the business in the short and long term future.
Take action, get your finances updated weekly and monthly, look at the reporting and if you’re not sure what it means, ask someone who does, because you really cannot make or grow a sustainable business without this information.
Having real time information, accurate up to date financials, cashflow forecasting and budgeting in place, reviewed regularly means you are way ahead of the curve and can make the right, informed decisions.
Also means you’ll save a shed load on matchsticks to keep those peepers open after yet another sleepless night.
Call us to get your business finances in great shape
Call us to get your business finances in great shape We hope the above has given you some real value. Why torment yourself with the money side of things? If you’d feel much better about life, the universe and everything in between with reliable, experienced financial expertise on your side, let’s talk.