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How to cope with big costs, when you’re a small business

The cost of running a small business seems always to be increasing and as costs mount, some struggle to ‘keep up’ financially.

According to research commissioned by the Federation of Small Businesses (FSB), the UK small business community is collectively spending 15 per cent more on taxes, levies and employment obligations than it was back in 2011.

Late payments, rising business rates and employment costs, interest rates, Making Tax Digital (MTD), Brexit-related uncertainty and declining sales are just a handful of the challenges that businesses are currently facing. Unfortunately, these are also challenges that are unlikely to be resolved over-night.

Moreover, it is particularly well documented that small and medium sized enterprises (SME’s) are often disproportionately impacted by these challenges. This can be due to a lack of resources, experience, awareness or available revenue.

So, how can small businesses help themselves, when it comes to handling big costs?

 

Understand your accounts

Understanding your accounts is key to running your business effectively, no matter the state of the economy. At the very least, you should be aware of what’s coming in and what’s going out. 

When it comes to extracting and interpreting more detailed information, this is where many businesses benefit from involving a team of professionals to take care of the number crunching for them.

We can help you to produce regular, up-to-date accounts and we can help you to extract meaningful data from these to inform cashflow forecasts and performance projections. 

Armed with valuable insight, your small business will have a better chance of surviving and succeeding in the long-term.

 

Make the most of tax reliefs

When it comes to the outlays that businesses have to account for, tax is undoubtedly one of the biggest. Making the most of tax reliefs is key to compliantly reducing your liabilities. This in turn will ensure that you keep more of what you’ve worked hard for. 

Without professional advice, it can be tricky to identify exactly which reliefs you’re eligible for. Engaging an experienced tax adviser could, therefore, save you a significant amount of money further down the line.

 

Don’t be afraid to invest in your small business

Waning confidence in the economy and worries about the future can put many small businesses off investing money back into their business. Instead, they opt to sit on their profits ‘just in case’. 

It isn’t always the perfect time to invest and you should always assess the risk before making a decision. However, if you have the means to do so, you shouldn’t be afraid to invest in your business.

Without investment, how will your small business ever move forward, remain competitive and continue to make money?

 

Switch to digital

Making Tax Digital aside, the benefits to your business of embracing digital extend way beyond tax. As time goes on, technology is only going to continue to advance. In essence, this will make doing business easier for those willing to engage with it.

Cloud accounting software, faster payment technology and mobile apps (to name just a few) are designed to help you streamline your operation and save money. 

 

Monitor debtors 

Monitor your debtors carefully!

A big bad debt could seriously impact upon your ability to fulfil any number of your financial obligations.

Make contact with debtors regularly and resolve disputes quickly. If they are having difficulties making payment, discuss potential solutions early on.

 

Product vs. Service

If you are selling a product, it is important to know what your break-even level of sales is and also at what point the business is profitable. With pressure on prices the break-even point may be higher than you realise, and you need to be aware of this.

If you are selling a service, consider the number of hours you are invoicing out each month. Though you may feel busy, it’s essential that you understand whether this is generating billable income.

 

Outsourcing

When you’re already feeling the pinch, outsourcing key business functions may well be the last thing on your mind. However, outsourcing can be a great way to streamline operations that are eating up your time, money and resources (perhaps without you even realising it).

 

Plan, plan, plan

We know we talk about planning a lot, but it’s because it’s so important. Without planning, there is no direction, no way of benchmarking your performance and no way of knowing where you might end up.

Proactive planning can help you to better protect your finances, it’s a fact. Look ahead, make note of financial obligations that you know you will definitely need to fulfil and how you plan to fulfil them and come up with a sound contingency plan for those that may crop up unexpectedly.

 

A suitable structure

Consider whether the financial structure of your business is appropriate. For example, you might be relying on short term finance to fund long term projects. Take time to assess your financial requirements and the funding you currently have in place – if the two are at odds then it may be time for a re-think.

 

How can George Hay help your small business?

Those small businesses which dedicate little or no time to understanding their income and outgoings, or to managing their cashflow, can easily succumb to financial pressures and find themselves floundering. The strategies we’ve discussed above can indeed help you to cope with increasing costs; however, before making any long-term financial decisions, it is wise to take professional advice.

We’ve been working with small businesses for over 80 years, across a range of industry sectors, and we understand the issues they face. We work with you and tailor our services to your needs, not just at year end but at all times, to make running your business a breeze. 

Whilst ensuring you are compliant is always our first concern, we also pride ourselves on the consultative approach we take with all our clients. We won’t just help you to crunch the numbers, but also to interpret them and turn them into actionable insights.

To find out how we can help your small business, call us today on 01462 708810 or email letchworth@georgehay.co.uk

 

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