Essential Small Business Tips From Forecasting to Accountants Services
There are over 5 million businesses in the UK and 99% of these are small to medium sized enterprises (SMEs) hiring up to 250 people. Around 96% of this total are microbusinesses, employing less than 10 people. Rather staggeringly, these microbusinesses account for 32% of the UK’s employment and around 20% of the UK’s turnover.
Therefore, it’s clear to see that in the UK small business equals big business. Service and manufacturing industries play a major part in this, collectively accounting for over 80% of the UK’s turnover. From financial forecasting to accountancy, it is extremely important that small companies receive the most appropriate advice and the best support possible to stay afloat. Below you’ll find our essential small business tips that may make the difference between success and financial failure.
Managing Your Cash Flow
Cash flow issues arise when a business has more money going out than it does coming in. This is an all-too-familiar experience for almost every start-up business in the UK; especially those that start without any initial capital. Problems can be avoided by seeking professional financial help from the very start. Failure to act quickly if problems do arise can lead to more profound consequences, such as the failure to meet demanding financial commitments. In serious situations, failure to act quickly can result in insolvency.
Cash flow issues are extremely common and they needn’t be overtly threatening with appropriate management and some financial restructuring. A professional practitioner will be able to identify discrepancies in your profit margins, heighten your income stream and create a payment plan to reduce your debts/costs. Ideally, you should have an accurate cash-flow forecast in place beforehand that clearly highlights the viability of your businesses prospects moving forward. This, in theory, should prevent any cash flow issues before they occur. The important thing to remember is to address any concerns almost immediately; before they spiral further out of control.
Have You Got a Business Plan?
It cannot be stressed enough how important it is to have a clear business plan in place for your organisation. You would be surprised at the number of businesses that don’t. The lack of a solid business plan is one of the most common reasons for SMEs to fail in the UK. It is quite simple really, how do you expect your company to thrive if you have no concrete idea of where it sits on the market or where you would like it to go?
You cannot successfully avoid debt if you have no plan in place to do so. Your every expense and investment should be expected and planned for in advance – so none of it comes as a surprise! Business plans can change and that’s absolutely fine, there’s no need for your plan to be rigid or perfect first time. The important thing is to just have one in place from the very start.
Put Financial Forecasting First
Financial forecasting forms an integral part of your business plan. You should scale up only when you really need to. You may feel like you require 3-4 more members of staff and some new equipment; but do you actually need it? Are you jumping the gun a bit and rushing things? The only way to gain an accurate idea is to look at your financial forecast. If you have an accurate and detailed forecast in place, you should know whether you can afford to upscale or whether doing so will cause more problems than it solves.
Scaling up too fast can take up too many resources and too much money. Your cash may start to hemorrhage before your fresh staff members can even contribute. If you don’t have the income to support additional expenses, then you shouldn’t hire extra hands. It’s as simple as that – only scale up when you truly have to. A detailed financial forecast and business plan are all you need to make an accurate and informed decision on this.
The Importance of Good Credit Control
If you’re a financing company or a company that provides credit, it is extremely important that you maintain good credit control. This is a strategy employed by organisations to promote good credit amongst creditworthy individuals and to deny credit to irresponsible borrowers. This will help to increase sales through customers with good credit risk and minimise the risk of losses through customers with poor credit risk. This in turn creates good cash flow. The effectiveness of this method is largely determined by the efficiency of the procedures used to determine a prospect’s creditworthiness.
It’s also just as important to maintain a good credit score for your own business. A credit report is a historical snapshot of any type of credit your business has obtained in the last 6 years. This financial account will provide an indication of how much money you have received and if you have failed to meet any repayments in the specified time. This report will provide details of credit cards, loans, mortgages, overdrafts, phone contracts and utility bills. The financial state and obligatory demands of these elements will generate a credit score.
All of the information on your credit report is weighed up and assessed in order to evaluate whether or not your business can comfortably afford to manage a new loan and repayment terms. Each credit and the financial state of each credit will develop a score and then all scores are added together into a formula.
What Does Your Credit Score Mean?
Business owners with high scores are deemed minimal risk and therefore they are more likely to be allowed credit. Those with low scores can be denied credit as low scores indicate a business has financial issues or has missed loan repayments in the past. Lenders themselves calculate their own score by using several sources of information; including your credit report, past credit applications and previous business dealings.
A good credit report can mean a better chance of securing a business loan at a better rate, so maintaining good credit history is extremely important. There are a number of things you can do to improve your credit report, including:
• Review your credit report on a regular basis
• Keep up to date with current repayment obligations
• Close any redundant accounts as they are not generating good credit
• Space out your credit applications
• Protect your identity to prevent fraudulent behaviour and applications
Making Use of Accountancy Technology
In today’s world of digital innovation and advancements, it is extremely important and beneficial for businesses to exploit the latest technology in order to simplify business processes. Online banking is a simple and often undervalued example of how technology can be used in this sense. We take online banking for granted these days but it wasn’t always so easy to check your account balance or transactions. Before the internet, you had to visit your bank for such information.
Making Tax Digital is a more recent example of how technology affects our financial processes. Making Tax Digital is an integral element of the UK government’s plans to make tax affairs easier and quicker for businesses and individuals alike. This new process will mean the end of annual tax returns for millions of people nationwide. In its place, we will be expected to keep digital records and send HMRC quarterly updates instead.
This will mean your information is handled and used better, allowing customers to see the information that HMRC holds and complete/correct any necessary details. The service provides tax in real time so customers no longer need to wait until the end of the year to know how much tax they should pay. Perhaps the biggest advantage is that customers will be able to interact digitally with HMRC representatives – at a time that suits them.
Making Tax Digital Schedule
The Making Tax Digital roadmap was published in December 2015 and sets out to achieve its mission statement by 2020. Just over 3 million small businesses have been given an extra year, until the year 2019, before they are required to make the switch and keep digital records online. All other businesses, self-employed individuals and landlords will be required to start using the new service from:
• April 2019 for income tax and NI purposes if your turnover is above the VAT threshold
• April 2020 for income tax and NI purposes if your turnover is below the VAT threshold
Businesses, self-employed individuals and landlords that have turnovers below £10,000 are exempt. Having a clearer tax statement and situation in place will help towards detailing a more accurate and reliable business plan and financial forecast. This will help businesses get their tax right first time and prevent punishment for honest mistakes. Reducing the risk of error, lowering the opportunity for unwelcome compliance checks and providing greater certainty will all help towards a more confident approach to business and finance.
Hunter Gee Holroyd Here to Help
Modern technology is continually transforming the way we shop, travel, communicate and trade. Almost everybody has a tablet or mobile phone device these days; meaning technology is at the forefront of almost everything we do. Our appetite for digital services is extremely pungent and paper-based systems are becoming somewhat obsolete; especially with HMRC’s latest paperless-service drive.
Here at Hunter Gee Holroyd our online services are here to help small to medium sized businesses across the UK. We recognise how important it is to make use of the latest technology in order to sell and advertise online whilst also maintaining healthy business circumstances. From simple business advice to audit, accountancy and taxation services; our team of financial and accountancy experts are here to help you succeed. We have over 75 years’ experience providing financial services to business start-ups and medium sized organisations, frequently exceeding expectations along the way.
If you need some suggestions on how to improve your profits or help your business grow, give the team a call today on 01904 655202. Alternatively, you can visit our contact page for more information. We’ll endeavour to take the time to listen to your requirements and provide professional expertise as a solution to your problem. We work very closely with our clients and take the time to get to know your business inside out. Get in touch for more information!