September Tax Update

This is the first of what I hope to make a regular feature on this blog. I hope you find it informative. Please contact me to discuss any of the matters discussed in further detail.

PLEASE NOTE: content is accurate as of the date of publication (31st August 2021). As with anything related to taxation these things are subject to change so please do take advice before you rely on anything in this article.

Big Tax Bills For the Self-Employed In 2022/23?

Draft legislation has been published to change the basis periods for the assessment of self-employed profits to coincide with the tax year. The proposed new rules provide that from 2023/24 onwards profits or losses will be apportioned to tax years where the period of account does not coincide with the tax year. This is intended to coincide with the start of Making Tax Digital for income tax.

The transitional rules proposed for the previous 2022/23 tax year could result in large tax bills for some sole traders and partners, particularly those with an existing 30 April year-end. The profits of the year ended 30 April 2021 will be taxed in 2021/22 under the current rules with 2023/24 taxing profits arising between 6 April 2023 and 5 April 2024 under the new rules. But what about 2022/23?

The profits taxed in 2022/23 will be those for the year ended 30 April 2022 plus the period 1 May 2022 to 5 April 2023 – in total 23 months profits!

The good news is that there will be a deduction for 11 months “overlap relief” which typically arose when profits were taxed twice at the start of the business – but those will usually be much lower than the extra 11 months being taxed in 2022/23!

The transitional provisions allow the taxpayer to elect to spread the excess profits over the next 5 tax years to smooth out the excessive tax bill.

Get in touch if you need help or advice on how much you need to set aside to cover these additional tax liabilities.

September Is The Last Month For CJRS “Furlough” Grants

The Government is pulling the plug on support to employers for furloughed staff at the end of September as they anticipate that the economy will be back to normal by October. The grant claims for employees furloughed in the month of September are 60% of the employee’s usual pay up to a maximum cap of £1,875. Make sure that you make your final claims for the month of September by 14 October and make any adjustments by 28 October 2021.

The end of furlough may trigger many businesses to assess their staffing levels going forward and many may be considering making the tough decision about which staff to make redundant.

Dealing With Redundancies Correctly

Remember that there are key steps that need to be followed as far as employment law is concerned. It is also important to treat any payments on termination of employment correctly for tax and national insurance purposes. In genuine redundancy situations, the first £30,000 paid on termination of employment is tax-free but many employers get this wrong.

The £30,000 includes statutory redundancy pay and any enhancement from the employer as well as continuing benefits such as private health insurance.

The excess is subject to income tax and employer’s national insurance.

5% VAT On Tourism And Hospitality Ends 30th September

The temporary 5% VAT rate that has applied to supplies made in the tourism and hospitality sector since the start of the pandemic comes to an end at the end of September. The rate then increases to 12.5% from 1 October until 31 March 2022 when it reverts to the standard rate.

For those businesses operating in this sector, this will mean an amendment to their accounting software and possibly prices. Note that the 20% rate continues to apply to the sales of alcohol.

Where deposits and other payments are taken before 30 September 2021 the 5% rate would apply to that supply as that would be the tax point for the supply.

5 Secrets Your Bookkeeper Wishes You Knew

Every business needs a bookkeeper, but there may be something that yours isn’t telling you. We’ve compiled a list of the most common secrets your bookkeeper most likely wishes that you knew. They will help you save time and money in your business, and get the most out of the services that you shell out for.

1. Don’t Ignore Audits

Of course, no business owner wants to be audited but that doesn’t mean it won’t happen. Hiring a bookkeeper reduces the chance that this will happen to you, and help you to prepare if you do have to face one.

Don’t slack off and forget about your audit trails until you actually have to face one. Adopt a bill payment solution that creates audit trails for you. It needs to track every action in the system so that your records are as transparent as possible. That way if you do face an audit, you’re far less likely to receive a fine or lose your hair due to stress.

2. Use the Cloud

It amazes me how many business owners won’t adopt cloud-based accounting software. Cloud-based technology centralises your financial information. This makes it accessible from anywhere, at any time. This is a huge time-saver. It puts all your accounting records online. Retrieving old invoices from paper files becomes a thing of the past.
Furthermore, the cloud offers a range of security benefits. Permissions-based access gives you full control over which employees have access to information. Cloud data is encrypted and heavily protected. And your records are secure from physical damage. So fire and flood won’t destroy all your records.

3. Remote Working is the Way Forward

Your bookkeeper no longer needs to do house calls. With cloud technology accountants and bookkeepers can do their work remotely. Cloud-based software means your bookkeeper can handle their duties quickly and efficiently off-site. This increases flexibility and saves time for both parties.

4. Separate Your Duties

As a small business owner, there’s such a thing as being too trusting. No one wants to believe that their employees would steal from them. But internal theft is very common. According to the latest employee theft statistics, 75% of workers have stolen from their employers at least once. And employee theft costs UK businesses around £190m every year.

To prevent this, consider separating duties to limit fraudulent activities within your business. The employee who handles financial transactions should not be in charge of recording them. This makes it easier for them to misappropriate funds and cover up their fraudulent actions.

5. Avoid Double Data Entry

Double data entry means entering data from one system into another. This is a waste of time. And it increases the likelihood that your records will contain inaccuracies. This will compound and create a big problem later on. Instead, integrate your technologies so that your records stay accurate and up-to-date. Ask your bookkeeper to connect your cloud accounting software to your expense management system. This way your records stay accurate and you can put your time to better use.

Summary

By implementing these simple bookkeeping secrets, you can save time and money in your business. Take advantage of the power of cloud-based technology so you don’t waste time on tasks that would be better automated. Separate out duties to protect your business against employee theft. And keep your audit trails accurate and up-to-date.

How to Maintain a Healthy Cash Flow

Cash Flow Chart on Desk

A healthy cash flow is the lifeblood of your small business. You need cash coming in regularly to ensure that you can continue operations and pay your staff and bills on time. However, cash flow can be precarious when you’re running a small business and late customer payments or unforeseen costs can cause huge disruption. In addition, it’s normal to expect a temporary period of negative cash flow as you scale up since you have to spend before you reap the rewards.

So how can you maintain a healthy cash flow in spite of these trials and tribulations? It may sound daunting but it simply requires a little thought and common sense. Read on to discover how to keep your cash flowing.

1. Get Your Invoices Right

Your clients won’t pay you on time if you send out incorrect invoices, and this then has a negative impact on your cash flow. Ensure that all the information on your invoices is correct and includes a price breakdown. Make sure that you include all your payment details so that it’s as easy as possible for your clients to pay you. This saves a lot of back and forth answering questions and fixing mistakes and ensures that you’ll have money in your bank account sooner rather than later.

Furthermore, it’s important to ensure that you hash out the payment details upfront when you sign a new client. Many business owners often forget this amid all the excitement and then have to waste time sorting it out later. During the onboarding process, make sure that you understand who you should send the invoice to and who to contact if any issues arise. Agree upon a payment date or ensure that the client understands when they have to pay in relation to receiving an invoice.

2. Send Your Invoices On Time

Late invoices result in late payments. You’d be surprised at just how many business owners are lax about sending out invoices, which leads to a multitude of cash flow problems later on. Invoicing your clients on time is a simple yet effective way to ensure that your cash flow stays healthy. If you find it difficult to keep on top of invoicing, set aside time each week to do it or consider investing in invoicing software.

As well as sending your invoices on time, you need to keep on top of payment deadlines and be aware of which clients are yet to cough up. This allows you to send polite reminders to jog their memory ahead of time and chase up any late payments.

3. Review Your Payment Model

If your clients pay 100% of your fees after completion, you’re taking a pretty big leap of faith. It’s wise to require a deposit or upfront payment to ensure that you don’t end up out of pocket.

Additionally, it’s worth implementing late fees to encourage your clients or customers to pay you in a timely manner. They’re less likely to forget or try to delay payment if doing so will incur a charge!

4. Create a Calendar

Cash flow isn’t just about money coming in. You also need to be aware of how much you’re paying out, and when. Create a calendar to keep track of your bills and taxes so that you know when your cash balance is going to take a dip. This allows you to prepare for any expenses and create cash flow projections. It also enables you to make payments on time, which is crucial for maintaining a good relationship with your lenders, suppliers and staff.

5. Create Cash Flow Forecasts

Expanding your business often requires you to spend more than you currently earn, creating a short-term negative cash flow. It’s important to create accurate cash flow forecasts when planning for growth so that you can expand your business in a safe and affordable way, whilst maintaining your current standard of work. It’s no good expanding if you have to completely starve your business of cash to do so.

Creating cash flow forecasts can be complicated, but there are forecasting tools to help with this. The services of a professional accountant can also be extremely useful in creating these projections and adjusting your growth budget accordingly.

6. Prepare a Safety Net

It’s never a bad idea to create a safety net. Ensure that your business has a cash reserve so that unforeseen costs don’t break the bank. Life is unpredictable and no matter how carefully you plan ahead, there will always be unprecedented expenses. An emergency cash reserve gives you some breathing space and means that you can maintain a healthy cash flow even when you have to unexpectedly shell out for equipment repairs, hidden fees or costs that you failed to account for.

Keep Your Money Moving

A stagnant cash flow will not only cause you to lose money, but also to miss out on growth and investment opportunities. If your cash flow is negative for too long, your business will no longer be able to operate. It’s important that you employ the above common-sense strategies to maintain a healthy cash flow and ensure the survival and success of your small business.

How to Avoid Common Money Leaks in Your Small Business

Money leaks in your small business eat away at your profits without you even knowing about it. It’s good practice to check for leaks regularly to ensure that you’re not wasting money. Plugging money leaks will reduce your spending. This in turn will boost your profit margins without too much extra work on your part. Here are some common money leaks to look out for, and how to fix them.

1. Online Advertising

It’s easy to let advertising fees get out of hand. Social media pay-per-click fees may seem small. But they do add up and can present a significant cost for your small business. Keep a close eye on any social media or Google advertising campaigns to ensure that you’re not running up a big bill. It’s also important that you review the effectiveness of these adverts. If they’re not bringing in business, they’re a wasted expense.

2. Subscriptions

We’ve all signed up for a free trial with no intention to continue, then forgotten all about it and ended up paying. Other times, we stop using a service but forget to cancel the subscription. It’s all too easy to let your business leak money this way, but it all adds up. Review your subscriptions and promptly cancel any that are no longer benefiting you.

3. Power Usage

Leaving the lights on overnight and forgetting to switch off devices may not seem like a big deal. But over time they can eat into your profit margins. It’s important to get into good energy-saving habits and encourage your staff to do the same.

There are other ways to cut down on electricity usage. Insulated blinds or switching to energy-efficient lightbulbs present an upfront cost. But they will save your business a significant amount of money in the long term.

4. Office Supplies

It’s easy to go over the top with office supplies, so take some time to assess what is and isn’t necessary. Multicoloured sticky notes are fun, but they’re hardly a necessary expense. Many businesses waste a lot of money on printing. But this is avoidable in the age of cloud-based software.

5. Credit Card Fees

Being lax with your credit card payments is a surefire way to create unnecessary costs. Clear your balance each month as far as possible. And pay attention to any annual or hidden fees. This way you can save your business money and boost your profit margins.

When signing up for a credit card, don’t get distracted by the attractive rewards. Make sure that you read the fine print and understand the fees before you choose a card. This will help you to use your card wisely and avoid any money leaks.

6. Smartphone Bills

If you’re not keeping a close eye on your smartphone bills, you could be paying a lot more than necessary. Review your charges every month to ensure that you and your staff aren’t exceeding your plans. Take a close look at your usage, too, because you could be paying for more than you’re actually using. Shop around too to see whether you could benefit from switching plans or providers.

It Pays to Plug

By plugging these common money leaks, you can cut down on costs without making any real sacrifices. And checking for leaks will help you make your budget go further. So make sure you don’t grow complacent. Perform these basic checks to maintain a healthy profit margin and prevent your business from losing money.

The Pros and Cons of Working With an Angel Investor

The Pros

Working with an angel investor seems ideal for small businesses, especially startups. But, it’s not without its challenges.

Angel investors will usually take an equity stake in the company. And this makes it perfect for businesses that are short of funds or collateral for loans.

Angel finance sits between bootstrapping or family funding and extensive business loans.

Angel investing provides clear benefits for small businesses. But it has specific disadvantages that you shouldn’t overlook. Here are the most significant pros and cons of working with an angel investor.

1. Ideal for Startups

To secure the support of an angel investor you will need a solid business plan. And a convincing presentation. This compares favourably to working with a financial institution. They will expect proof of profitability and a proven business model. If you apply for a loan you will need to provide collateral as security.

This makes angel investing more readily available for startups than loans.

Family and friends can also provide the starting funds, but they might be limited. Angel investors, meanwhile, are likely to have the necessary funds.

2. It’s not a Loan

Because angel investing relies on equity, it comes with specific rules. Most importantly, the investor will take a stake in the business. And they will have an exit strategy if the business doesn’t take off. This means there’s no monthly payment obligation.

A significant downside of taking out a loan is that the business owner is liable even if the business fails. With angel investors, no direct payoff is expected.

3. No Risk-Based Limitations

Angel investors most often have no problem taking a risk on a startup that shows potential. But, this doesn’t mean they are reckless. Angel investors are usually successful entrepreneurs with plenty of experience. The funding they provide usually comes from their personal resources. Also, they often work within a network that helps to dilute the risk.

The Cons

1. Greater Expectations

Angel investors are exposed to the startup’s risk. They expect high returns and often exert intense pressure in that regard.

Setting the bar high comes naturally with this type of financing. This compensates for the higher risk and no monthly obligations towards the investor.

2. Less Control

With a stake in the business, angel investors will take partial control of the company. With their experience, their influence on business operations could be seen as helpful.

Still, business owners are never too keen to relinquish control. But their choices are limited. The level of control that the owner gets to keep over the company will depend on the circumstances. There’s a risk involved with the direction of the business going forward. This balances the investor’s initial risk in financing the startup.

Working with Angel Investors

In summary, securing financing through an angel investor comes with advantages and disadvantages. Those can turn out to be relatively well balanced, as the risks and returns become mutual. Finding the right angel investor could prove to be the best way of taking a startup off the ground.

How To Write A Comprehensive Business Plan

Are you planning a new business or thinking about pivoting an existing one? Spice up your business plan to start on the right foot.

Having a detailed business plan is critical to any venture.

It helps you understand your goals and keeps you focused on what to do. At the same time, it can help secure vital investments for growing your business.

Here’s an outline that may be of help if you need to create one for your business.

The Executive Summary

Always starts with an executive summary. This is a brief outline of the business plan that contains the proposal and objectives.

It’s an overall snapshot of the proposal that will get a lot more detailed later on.

Background

The background section contains information about what the business does, how everything works, and the current stage of development.

Here, you must explain your niche and highlight how the business fits in it.

Service Provided

Offer relevant information about the services provided. In the case of a B2C company, you may substitute with product information.

Make sure to cover all the benefits, costs, and so on.

Market Breakdown and Strategy

Business plans should always contain a detailed market breakdown. This includes things such as barriers to entry, market structure, and other relevant characteristics.

The market breakdown section requires a fair amount of research. That’s why it’s the part that often takes the longest to complete in great detail.

As for the marketing strategy, this is where your business plan outlines your ideas on how to build awareness. Write about how you plan to market your business, package your offer, and sell it.

Business Operations

If you want to create a detailed business plan, don’t forget to cover the day-to-day operations. Outline how everything runs and create a clear outline from production to sales.

This is particularly relevant information to any financial investor.

Management Breakdown

This is an optional step, but if the goal of the plan is to secure funding to start strong, you wouldn’t want to skip this.

Provide a clear picture of the key roles that the business needs. Define those roles and the type of employees desired.

Proposal

Your business plan is all about getting that proposal to make sense. So, the goal is to state your requirements clearly.

At the same time, list the benefits that your proposal brings to the table.

Financial Risks

Apart from the sales and cash flow projections, an important element of this section is the projected balance sheets.

Remember, a business plan isn’t only for proposing a new business. It’s also a useful tool when you want to pivot or seek funding for a struggling venture.

So make sure to include a dedicated subsection that evaluates the risks.

Legal Information

Some industries are highly regulated and you may have to include legal disclaimers or any permits needed.

Keep everything that has to do with the law in a dedicated section, most commonly somewhere near the end.

Ensure a Good Flow

An often overlooked aspect of business plans is the flow. A comprehensive plan can get very detailed and you need to figure out how to lay the plan out and build anticipation for the proposal.

To begin with, you can use a story formula that goes: premise, context, and realisation.

Always remember that a good business plan not only has all the necessary details but also has a good flow. It’s crucial if you want to make the reader sign on the dotted line.

5 Powerful Growth Strategies for Your Small Business

Every business owner starts out brimming with motivation and enthusiasm. And yet, 20% of small businesses fail within the first year. Jump ahead to five years and that number rises to a terrifying 70%. These numbers are alarming, but that doesn’t mean you should throw in the towel yet. It’s important to put strong business growth strategies in place so that you make it past the first year and continue to grow. You need to know what to do when your business hits a plateau. And how to speed up business growth so that you’ll see success sooner.

Here are five powerful strategies to ensure that your small business grows.

1. Increase Market Penetration

Market penetration is the sales volume of a good or service in relation to its total target market. Increasing your market penetration should increase your market share. Ramping up your advertising efforts and creating attractive promotional offers are two reliable ways to increase market penetration. Broadening the range of products or services that you offer may also prove effective.

2. Market Development

If your market is saturated or you’re struggling to attract customers in your local area, consider market development. This means finding new customers for your current products. B2B marketing, promoting your products to a different demographic, or expanding internationally are all viable strategies.

A spa might consider selling its products via a local supermarket or cosmetics store. A restaurant might expand to offer catering for private parties and business conferences.

3. Expand Your Product Line

Expanding your range of products or services may make your business more appealing to your target market. It’s a great way to refresh customer interest and generate a buzz that will help to attract new customers, too.

Of course, it could be that you already offer a large range of products. If so, consider taking a look at how much revenue each product brings in. Phase out weaker-performing items and make room for new products to excite your customers.

4. Marketing Channels

If your marketing efforts aren’t bringing in business, consider changing channels. This doesn’t mean abandoning your current efforts but investigating new ways to reach your target customers.

Most small businesses use email, social media, and a company website. If you aren’t already employing these three marketing channels, then it’s time to do so. If you are using all three channels to communicate with your customers, then you need to ask:

  • Are the emails clear and engaging?
  • Is the website content rich, or does it only show your opening hours and contact details?
  • Do you show up on social media every day, or once in a blue moon?

On top of this, consider further expanding your marketing channels. Some of the most popular and cost-effective marketing strategies are:

  • Video content
  • Influencer marketing
  • SEO
  • Podcasts

5. Segmentation

Market segmentation means dividing your market into various groups. Then you can create targeted campaigns to appeal to each group. The most effective marketing is specific, rather than general; you can’t be all things to all people.

You may want to divide your market up by:

  • Location
  • Age
  • Gender
  • Profession
  • Behaviour
  • Interests

Of course, you will need data to be able to create the above segments. Email surveys, site analytics, and customer buying history are helpful for this. And using a CRM tool to optimise your segmentation process, can save you a lot of guesswork and time.

Summary

If you’re struggling to grow your small business then these, employed correctly, should help you grow at a steady and sustainable rate. Their effectiveness will depend on the needs of your specific business. For example, a business with a large customer base will benefit more from segmentation than one with a few big customers. Take some time to sit down and develop a plan that is realistic for your business. Then track your progress to help you optimise growth.

How To Spot A Business In Distress

It’s always a shock to see a successful company go under, but this doesn’t happen out of the blue. There are always warning signs. The survival of your business relies on you being able to recognise them. The sooner you can spot financial trouble, the sooner you can start working on a solution. Nothing good ever comes from burying your head in the sand, so it’s best to get well-acquainted with the red flags. Here are seven warning signs that you’re dealing with a business in distress.

1. Refinancing

Let’s be clear: refinancing is common and it’s not always a sign of trouble, so long as you can afford the repayments. Borrowing money against the value of an asset is a sensible way of lowering interest rates. And it helps to free up cash for your business.

It’s when you find yourself refinancing frequently that you need to worry. It indicates that your company is in poor financial health and struggling to make ends meet. What’s more, lenders grow suspicious of businesses that need to refinance all the time. And your credit score can take a hit, worsening your problems.

2. Poor Cash Flow

Cash flow is the lifeblood of your business. It’s the key to survival, investment, and growth. You need enough cash to cover your outgoings or you risk mounting debt.

Negative cash flow is part and parcel of launching or expanding your small business. So it’s accepted for a short while. But, your business can’t survive indefinitely without income. You need at least enough cash to cover your outgoings to keep your company afloat.

For small businesses, cash flow can often be unsteady – all it takes is a few late customer payments to rock the boat. It most definitely pays to be wary of premature expansion and overspending. These factors can significantly affect your cash flow.

3. Creditor Pressure

Being chased by creditors is a clear sign that your business is in financial distress. When you’re dealing with an imbalanced cash flow, it can be tempting to delay your payments. But this is short-sighted and often sparks a vicious cycle of financial problems.

It’s in your best interests to stay in your creditors’ good graces. Late payments can result in a poor credit score, which will make it difficult to secure loans in the future. Moreover, creditors won’t hesitate to chase you down or resort to legal action to claim what they’re owed. This is disastrous for any small business. So stay focused on the bigger picture and make your repayments on time.

4. Over-Reliance on Individual Projects or Contracts

A healthy business has more than one source of income. It will also have recurring income from several clients. Whilst losing contracts is never ideal, it shouldn’t have the power to break your business. If the financial health of your business depends on one source of income, it’s a sign that you’re heading for trouble.

Focusing all your efforts on securing new customers is also a mistake. Especially if this is at the expense of existing customers. It’s always unwise to antagonise your current clients. Studies show that customer acquisition can be 95% more expensive than customer retention. Increasing customer retention rates by 5% increases your profit by 25-95%. Nurturing your current clientele is vital for the financial health of your business.

5. Low Staff Morale

Employee morale is often one of the most accurate indicators of how your business is doing. It’s important to keep your staff satisfied. Reduced hours, contractual changes, and pay freezes are signs of a business in trouble. As a result, morale plummets, with further troubling consequences for the company.

6. Unhealthy Office Atmosphere

Low office morale causes productivity to take a nosedive. Absenteeism begins to rise, which exacerbates the problem. Staff spot that things aren’t going well for the business and may decide to jump before they’re pushed. leading to a high staff turnover.

7. Your Customers Know Something’s Wrong

Your customers are smart. It won’t take them long to notice dissatisfied employees. Or that they’re getting less for their money than they used to. Unhappy customers won’t hesitate to defect to your competitors. And word about your financial trouble may get around fast. This is the last thing a struggling business needs, as it can be the final nail in the coffin.

Summary

None of these signs is an automatic death knell for your business. But, if you spot several of these problems at once, it’s time to take action. The sooner you fix these issues, the quicker your business can start to recover. Don’t wait for word to get around; put out the fire before it spreads.

How to Preserve Your Startup Budget

Most entrepreneurs are familiar with the rather depressing failure rate of startup businesses. Research by Investopedia found that 50% fail by their fifth year. The same study found that one of the top reasons for this was that the money ran out. To protect your startup, you need to keep a close eye on your expenditure and stay within budget. Here are five ways to manage your cash flow to protect your cash reserves and stop burning through them like there’s no tomorrow.

Start Small

Launching a startup is exciting and as a passionate entrepreneur, you want to go in all guns blazing. But consider starting small instead.

Limiting your initial outlay will allow you to increase your spending as you gain skills and experience. This approach will boost your chances of success. Increasing your spending on equipment and product development in stages, allows you to review the effectiveness at each stage of your business growth. Then you can make informed decisions on how to proceed. This way, there is less risk involved and you won’t burn through cash so fast.

Equipment Leasing or Loans

Buying a lot of new equipment will make a dent in your budget, which is why you should consider leasing or a loan.

Leasing means renting equipment for a fixed period, often with the option to buy or upgrade at the end of the contract. This is a great option if your equipment requires regular upgrades or if you only need it for a short amount of time.

Equipment loans allow you to buy the equipment but pay it off in manageable installments. Which is great news for your cash flow. This agreement works in the same way as a traditional bank loan but it tends to be lower risk.

Resist the Lure of a Fancy Office

Every entrepreneur loves the idea of a flashy office with funky furniture and eye-catching artwork. But you don’t need this to succeed. Don’t get drawn in by the idea of an Instagram-perfect office, because this could be a serious drain on your budget. Instead, consider purchasing second-hand furniture and equipment to keep costs low. Yes, brand new luxury office chairs would be nice, but they’re hardly a necessity.

Focus less on how your offices look. Prioritise creating a comfortable environment for your employees. Your employees will be more productive if you have a quality heating and cooling system than high-end desks. It’s also worth investing in features such as insulation blinds and hand-dryers. These will save you money in the long run.

Outsource

Hiring is an expensive and time-consuming process. So you may want to consider outsourcing certain tasks. This is often cheaper than hiring a full-time member of staff. And you can scale the service up or down according to the needs of your business.

Track Cash Flow

Cash fuels your business. Without it, you’ll soon arrive at a standstill. It’s important to keep careful track of your cash flow from day one. You must ensure that you always have enough funds to continue operations. One of the best ways to do this is to prepare monthly cash flow statements. This will allow you to see how much is going in and out of your business. and identify areas for improvement. This can be a time-consuming task. It’s worth seeking the help of a professional accountant who can manage your cash flow. Then you can get back to running the business.

Summary

The best way to stop blowing through your startup budget is to be frugal and take measured steps, rather than risking all your capital at once. It’s natural to nurture big dreams about your new business. But try to focus on what is necessary so you can balance financial conservatism against growth. Second-hand furniture may not seem particularly glamorous right now. But flashy offices will be of no use to you if you run out of money.

If you’re struggling to manage your cash flow and business budget, seek the guidance of a professional accountant. He or she will help you to save money and plan for the future.

5 Common Tax Deductions that Small Business Owners Often Overlook

They say that only two things are certain in life: death and taxes. Paying tax is inevitable but there are things you can do to reduce the percentage of your income that the tax man takes. As a small business owner, the likelihood is that you’re probably paying too much tax, which is why we’ve put together a list of the most overlooked deductions to help you reduce your bill.

Of course, in order to claim the following tax deductions, you need to be on top of your bookkeeping. Get into the habit of updating your records and file all of your receipts and invoices in a well-organised system.

1. Startup Expenses

Money is usually tight during the startup phase and every penny counts, but many small business owners overlook startup costs. Don’t assume that it’s too late to claim, either; in the UK, for example, limited companies can claim relevant startup expenses for up to seven years before the business officially begins operations. Just because you’ve been in business for a few years doesn’t necessarily mean that you’ve missed the boat.

2. Home Office Expenses

If a room in your home functions as your primary place of business then you may be able to claim a home office deduction. Expenses such as gas, internet, and electricity will usually be deductible based on the percentage of your home used for work, and for how long. Therefore, it’s important to keep a record of how many hours you work each month in order to calculate this deduction.

You will also be able to claim expenses such as office furniture, although again you will have to calculate the usage portions. If you buy an office chair for £100 and use it exclusively for work, then you can claim the full amount. However, if you use it for personal reasons 30% of the time then you will only be able to deduct £70 from your taxable income.

3. Loss Carryovers

Business owners often overlook capital and net operating losses as tax deductions. It’s possible to carry these losses over into future tax years to reduce taxable income. With so many small businesses suffering due to the covid-19 pandemic, this is definitely a deduction to make note of. Loss carryovers can be used to reduce either the business’ or the owner’s income. It’s best to speak to your accountant about how your business can best benefit from this type of tax deduction. 

4. Losses on Bad Debts

If your business loses money due to a customer who won’t pay, an employee who quit after receiving advance wages, or loans to clients that your business is now unable to collect then you may be able to claim this amount as a tax deduction. You will have to prove that you have taken reasonable steps to collect this amount but have been unable to do so. Of course, this situation is less than ideal but it may help to soften the impact of a bad debt.

5. Education and Training

It’s a good idea to invest in your employees and you should be able to deduct the cost of doing so. Many business owners overlook the fact that educating and training their employees is a deductible tax expense, so keep a careful record of your spending in this area to receive a smaller tax bill.

Summary

We would all like a smaller tax bill, so be aware of these oft-overlooked deductions to ensure that you don’t end up paying more than necessary. It’s important to keep careful track of all of your expenses so that you don’t miss out on any potential tax deductions. If you’re unsure about whether an item qualifies for tax deductions, be sure to speak to your accountant or bookkeeper so that you don’t end up making a costly mistake.