Small businesses are the backbone of the economy, and as a small business owner, it is crucial to know how to manage your finances. Because of their size, small businesses can often be overlooked regarding financial advice and support. However, there are several ways that you can get help and advice on how to manage your finances as a small business.
Here are a few tips on managing your finances as a small business.
1. Keep track of your income and expenses
Every business owner should have a good understanding of their business’ finances. This means keeping track of your income and expenses regularly. You can do this by creating a simple spreadsheet or using accounting software. This will help you see where your money is coming in and going out and will allow you to spot any potential problems early on.
Many small businesses struggle because they do not properly track their finances. As a result, they can miss out on opportunities to save money or make informed decisions about their business. For example, if you know that you are spending more than you are earning, you can take steps to cut back on your expenses.
When it comes to small businesses, cash flow is king. By keeping track of your finances, you can ensure that your business has a healthy cash flow and avoid any potential financial problems.
2. Get advice from an accountant and a bookkeeper
One of the best ways to get advice on managing your finances as a small business is to speak to an accountant. Professional accountancy support services can be beneficial, especially if you are new to running a business. An accountant can help you understand your financial situation and offer advice on improving your business’s financial health.
A bookkeeper can also be a valuable asset to your business. Bookkeepers can help you keep track of your finances, prepare financial reports, and offer advice on financial management. Compared to accountants that focus more on tax and compliance, bookkeepers often have a more hands-on approach to helping small businesses with their finances.
Remember that you should seek professional advice before making significant financial decisions for your business. Accountants and bookkeepers can offer invaluable support and guidance, so it is worth speaking to them before making any decisions about your business’s finances.
3. Make sure you are claiming all the expenses you are entitled to
Small businesses can claim for some expenses, including business rates, office costs, travel expenses, and subsistence. Make sure you are claiming for all the expenses you are entitled to, as this can help to reduce your tax bill.
For example, if you are a sole trader, you may be able to claim for your home office expenses. This includes the cost of heating, lighting, and office equipment. If you use your car for business purposes, you may also be able to claim for your fuel costs and vehicle maintenance.
Remember that you can only claim for expenses directly related to your business. For example, you cannot claim for a new car just because you need it for your business. Speak to an accountant or tax advisor to get more information on what expenses you can claim.
4. Make use of business support schemes
Most small business owners are unaware of the range of support schemes available to them. But several government schemes and initiatives can help small businesses with their finances.
For example, the Enterprise Finance Guarantee Scheme offers loans of up to £1 million to small businesses struggling to get finance from traditional sources. The scheme is designed to help small companies considered too high-risk by banks and other lenders.
Small businesses can also take advantage of several tax reliefs and allowances. For example, the Research and Development Tax Credit scheme offers tax relief for companies undertaking research and development activities. These schemes can help small businesses with their finances, so it is worth familiarising yourself with them.
5. Use technology to your advantage
Technology has transformed the way businesses manage their finances. There are now many software applications and online tools that can help small businesses to keep track of their finances, prepare financial reports, and make payments.
For example, accounting software such as QuickBooks or Sage can help small businesses to automate their bookkeeping and accounting processes. This can save a lot of time and money and reduce the risk of human error. Many of these software applications also offer mobile apps, which can be very useful for small businesses that need to access their financial information on the go.
Online invoicing and payment tools can also help small businesses get paid faster and manage their cash flow more effectively. For example, invoice financing is a type of funding that allows companies to get an advance on their invoices. This can be a valuable way to improve your business’s cash flow and manage your finances more effectively.
There are several things that small businesses can do to manage their finances more effectively. These include seeking professional advice, claiming for all the expenses you are entitled to, using business support schemes, and using technology to your advantage. Following these tips can improve your business’s financial management and get your business on a sound financial footing.