21 November 2013

5 ways to get your business finances in order

5 simple tips to help you make sure your business finances are in order, whether you're just starting up or want to make greater savings.

Making sure your finances are straight is essential for any business. But for entrepreneurs launching their first start-ups, sorting out money issues can be a steep learning curve.

Here are our top tips for managing your finances well:

1. Choose the right structure for your business

Don’t be tempted to choose a complicated business model in order to pay less tax. Keep things simple and choose the structure that is most suitable for your business, which is likely to be a sole trader, partnership or limited company. And remember you will only have to pay corporation tax if you are making a profit. By paying for advice from a reputable accountant when you start-up, you could make greater savings in the long run.

2. Spread the cost of expensive purchases

If you are buying expensive equipment like computers or vehicles for your business, pay for the items in instalments over the period in which they will generate income for you. This way they will hopefully pay for themselves.

3. Send out invoices straight away and don’t be afraid to chase debts

Make sure you keep on top of your invoices. If someone owes you money, send them an invoice straight away and chase them if they don’t pay. Not collecting money you are owed can easily plunge your business into financial difficulty. Consider using a reputable debt recovery company if you are struggling, or if you are uncomfortable about blurring the client/supplier relationship by chasing money.

4. Keep up to date with your accounts

Diarise some time at the office each week to update your records and keep your books up to date. This way it won’t become a massive time-consuming task which you dread – particularly if you need to complete quarterly VAT returns.

5. Only use your overdraft as a last resort

Don’t make the mistake of looking at your overdraft as being available business funding. It is a good idea to rely on bank credit as little as possible, so overdrafts should only be seen as a way of temporarily solving cash-flow problems as a last resort.

If you’re struggling to get your finances in order or you feel unsure about issues relating to tax, cash flow or other issues involving money it is always a good idea to seek professional advice. Consulting an accountant can often more than pay for itself if they are able to advise you on ways to reduce your tax bill and use your money more wisely. Ask around your business centre for recommendations.

There is also a wealth of advice available on the HMRC website.