12 Jul 2023
Good cash flow is essential to the financial health of your business. In finance terms, cash is comparable to food – without it, your business will run into many health problems and eventually starve. Cash flow problems are often cited as one of the main reasons that small businesses fail, so you need to make this a priority. We’ve put together a list of the most common cash flow mistakes business owners make so that you can avoid these traps and keep your company in good financial stead.
1. Unrealistic Budgeting
Many small business owners underestimate how much it costs to get started, and this can lead to an array of cash flow problems. If in doubt, always overestimate your costs in order to avoid any nasty surprises.
Furthermore, if you underestimate how long it will take your business to become profitable, you may find yourself facing some serious cash flow problems. It’s important to create a realistic time frame for your business to reach profitability. Remember to account for seasonal peaks and troughs, too.
Many small business owners delay hiring an accountant until after they launch, but working with a quality accountant who has experience of your industry can help you to create a realistic budget that will save you a significant amount of time and money in the long run.
2. Not Creating a Cash Flow Budget
In addition to a business budget, you should create a separate cash flow budget so that you can understand when money will be flowing in and out of your bank account and plan accordingly. Money tied up in unpaid invoices is no good to you when your suppliers require payment right now. You must ensure that you always have enough cash to continue operations, so creating a cash flow budget is vital.
3. Slow Invoicing
One of the simplest ways to ensure a healthy cash flow is to get paid on time. Of course, this isn’t always 100% within your control but there are plenty of things you can do to encourage your clients and customers to pay you faster.
Firstly, when onboarding a new client, make sure that you hash out payment details straight away so that both of you know what to expect. You should both understand:
- Who will handle the invoice
- When it will be sent
- When it must be paid
- The method of payment.
It’s also worth checking who you should contact to handle any potential problems that may arise.
Secondly, send invoices on time and ensure that all of the details are correct. This will prevent a time-consuming back-and-forth communication to straighten out any mistakes.
Finally, keep a close eye on deadlines and don’t be afraid to send out a polite but firm reminder to customers who are cutting it fine. You may also want to consider introducing a late payment charge to incentivise them to cough up on time, but be sure to give your customers plenty of notice.
4. Not Having a Cash Reserve
Having a cash reserve is imperative for good cash flow management, but many business owners skip this crucial step and then find themselves in hot water later on. In any given business, unforeseen costs will arrive sooner or later and it’s important to prepare for this by creating a cash reserve. This way, you can smooth over any cash flow issues without going into debt or suffering an extreme amount of stress.
Summary
Maintaining a healthy cash flow is one of the most difficult parts of running a business, but it’s also incredibly important to the financial health of your company. Set yourself in good stead by planning carefully and creating a realistic budget to help you avoid overspending. Remember that cash flow and profitability, though related, are not the same thing and so it’s prudent to create and monitor a separate cash flow budget, too. The importance of good cash flow management really can’t be overstated, so when in doubt it’s always best to defer to a quality accountant for help with this essential process.
Did you know we’ve also got a free downloadable eBook dedicated to the most common profit draining mistakes made by small businesses. Check it out here.
Book a free consultation here, to learn more about how our bookkeeping services can support you.
7 Jul 2023
You might have received a statement from HMRC in the past few weeks reminding you that your payment on account is due by 31st July. We’re here to shed light on what a payment on account is so you can navigate this aspect of tax compliance. With the July 31 deadline approaching, it’s important to understand what payments on account entail and who they apply to.
What are payments on account?
When you’re self-employed, HMRC may require you to make payments on account of your future tax bill. These payments act as an advance payment for your tax liability and help you spread the cost over the year. They are calculated based on your previous year’s tax bill.
Who needs to make payments on account?
If your tax bill exceeds £1,000 and less than 80% of your tax liability is covered through tax deductions at source (e.g., through PAYE), you’re likely to be required to make payments on account. The first time you’re required to make a payment on account can come as a shock as you effectively need to pay 150% of your tax bill in one go so it’s essential to understand your individual tax situation and consult with a professional bookkeeper to ensure compliance.
At InterTax we always recommend that our clients file their tax returns as early as possible. Filing your tax return early offers several advantages:
- It provides a clear picture of your tax liability, allowing you to plan and budget effectively.
- Early filing also minimizes the risk of penalties for late submission and gives you peace of mind, knowing that your tax obligations are taken care of.
This month we’ll be diving deeper into the world of tax returns, bookkeeping services, and strategies for optimising your financial processes on our social media channels.
If you’d like to speak to us about how we can support you with any aspect of bookkeeping and self-assessment, book a free consultation here.
5 Jul 2023
Is your lack of confidence starting to affect the business? It’s possible to shed imposter syndrome and prevent it from reoccurring.
Imposter syndrome, unbeknownst to many, is a common condition found in high achievers, including the creative types, entrepreneurs, and more.
Business owners suffering from imposter syndrome may have it worst of all. Because if left unchecked, this is a problem that can bury a business deep in the ground.
But how do you deal with a problem like imposter syndrome?
Tip #1 – Face It
The first step to solving any personal issue is to admit that it exists. But with imposter syndrome, acknowledgement isn’t enough. Entrepreneurs have to face it and engage it head-on.
A simple trick involves questioning the negative whispers inside one’s head.
Imposter syndrome often tells business owners that they can’t do certain things or that they’re not good enough. To confront it, it’s critical to follow up those thoughts with reassuring phrases like perhaps, noted, however, nevertheless, and so on.
The idea is to not get hung up on those negative ideas and try to put a positive spin on them.
Tip #2 -Separate Feelings from Facts
Entrepreneurs that fall prey to imposter syndrome are those that let their emotions guide them in all sorts of situations.
Separating feelings from facts can help deal with the issue.
Remember, getting a bad feeling or becoming upset after making a mistake is no reason to feel inadequate.
Tip #3 -Change the Rules
Some business owners create impossible sets of rules. It’s because they try to operate under the assumption that they can’t make mistakes or ask for help.
And when they fail, they start to feel like imposters because that’s what the syndrome causes them to think.
While it’s important to set rules, you also must guide your business decisions by attainable standards and allow for some breathing room. This applies even to those in leadership positions.
Tip #4 – Visualise Success
Highly successful people often picture themselves winning. Whether it’s in sports or business, it’s always the same – it’s better to visualise success than spend too much time focusing on a potential impending disaster.
It’s also a technique that helps relieve performance anxiety and stress.
Tip #5 – Change the Default Response
Entrepreneurs that get imposter syndrome often have a negative response to mistakes and failure. For them, any mistake could lead to a negative response and a defeatist attitude.
It’s critical to change that response into something healthier.
Understand that there are benefits to be gained from losses. Every mistake can be a teachable moment that prevents you from repeating it.
It’s a Systematic Process
No entrepreneur overcomes imposter syndrome overnight. On the other hand, it’s also not impossible to beat it and prevent it from affecting your business in the future.
However, it does require a systematic approach. And you can start with baby steps and gradually improve your response to negative situations and thoughts.
Positivity, asking for help, changing the rules – these are all things that can help. Even spending more time visualising success can do a lot of good for someone lacking confidence in their leadership skills.
Book a free consultation here, to discuss your needs and learn how we can help you with any of your imposter syndrome struggles.
Did you know we’ve also got a free downloadable eBook dedicated to the most common profit draining mistakes made by small businesses. Check it out here.
3 Jul 2023
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 to 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 really wants to be audited but that doesn’t mean it won’t happen. Fortunately, hiring a bookkeeper reduces the chance that you will need to be audited 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. Be sure to adopt a bill payment solution that automatically creates these trails for you by tracking 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
You’d be surprised at just how many business owners are resistant to adopting cloud-based accounting or bookkeeping software. Cloud-based technology can be used to centralise your financial information and make it accessible from anywhere, at any time. This is a huge time-saver and means that you won’t have to waste time and energy rifling through a crammed filing cabinet to double-check an old invoice.
Furthermore, the cloud offers a range of security benefits. For one thing, permissions-based access gives you full control over which employees have access to certain information. Cloud data is also encrypted and heavily protected, which means that physical damage such as flooding or fire won’t destroy all of your records.
3. Remote Working is the Way Forward
Your bookkeeper no longer needs to do house calls. Virtual bookkeeping services mean that accountants and bookkeepers can do the bulk of their work without setting foot anywhere near your office. Cloud-based software means that your bookkeeper can handle all of their duties quickly and efficiently off-site, increasing flexibility and saving time for both parties.
4. Separate Your Duties
As a small business owner, there’s such a thing as being too trusting. Of course, no-one wants to believe that their employees would steal from them but internal theft is very common. In fact, research by the California Restaurant Association found that 95% of businesses have suffered from some form of employee theft.
In order to prevent this, consider separating duties to limit fraudulent activities within your business. For example, the employee who handles financial transactions should not be in charge of recording them, as 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. Not only is this a waste of time, it also increases the likelihood that your records will contain inaccuracies, which could compound and create a big problem later on. Instead, integrate your technologies so that all of your records automatically stay accurate and up-to-date. Speak to your bookkeeper about how to connect your cloud accounting software to your expense management so that your records stay impeccable and you can put your time to better use.
Summary
By implementing the above simple bookkeeping secrets, you can save both time and money in your business. Be sure to take advantage of the power of cloud-based technology so that you don’t waste time on tasks that would be far better automated, or on commuting when you could be working remotely. Finally, remember to separate out duties to protect your business against employee theft and remember to keep your audit trails accurate and up-to-date.
Did you know we’ve also got a free downloadable eBook dedicated to the most common profit draining mistakes made by small businesses. Check it out here.
Book a free consultation here, to learn how we can help you make better use of technology in your business.
21 Jun 2023
Being a successful entrepreneur requires more than just having a great idea. There are certain qualities and skills that all successful entrepreneurs share. Whether you’re just starting out or you’ve been in the game for a while, honing these qualities will help you achieve success.
#1 – Passion
A successful entrepreneur is passionate about their business and their product. They believe in what they’re doing and are always looking for ways to improve. Passionate entrepreneurs are also able to inspire others and build a team that shares their vision.
Passion is what inspires an entrepreneur to keep going when things get tough, and in the rocky world of business, things will definitely get tough at one point or another. If you don’t have a passion for your business, it will be very difficult to weather the storms.
#2 – A Willingness to Fail
No-one wants to fail, but a successful entrepreneur knows that it’s a necessary part of the journey. They are willing to take risks and experiment with new ideas, even if it means that they might fail. They view failure as a learning opportunity and use it to help them improve themselves and their business.
Each and every one of the world’s most legendary entrepreneurs has failed hundreds – if not thousands – of times.
Walt Disney was fired from his first job as an animator for being “not creative enough.” He was also turned down over 300 times when applying for financing for Disneyland.
Bill Gates’ first business, Traf-O-Data, was a complete failure. Even later on, despite the incredible success of Microsoft at large, the Internet Explorer browser was notorious for being buggy and slow – so much so that it became a popular joke among web users.
Oprah Winfrey was fired from her first job as a news anchor because she was “unfit for television.”
J.K. Rowling’s first Harry Potter book was rejected by 12 different publishers. When it was finally accepted by Bloomsbury, they only ordered 250 copies and told her not to expect much in terms of sales.
There are countless more examples that we could list, but the moral of the story is that no-one – not even the most successful entrepreneurs in the world – is immune to failure. The difference is that they don’t let it stop them. In order to succeed, you first have to be willing to fail – and fail hard.
#3 – Critical Thinking Skills
Successful entrepreneurs know how to think critically and solve problems. They aren’t afraid to ask questions and challenge the status quo. They are always looking for new and innovative ways to do things.
In order to be a successful entrepreneur, you need to be able to think on your feet and make quick decisions. You can’t afford to be indecisive or second-guess yourself – you have to be confident in your abilities and trust your gut.
Of course, that doesn’t mean that you should make rash decisions without thinking things through first. It’s important to strike a balance between being decisive and being thoughtful. The best entrepreneurs are able to do both, and this is where strong critical thinking skills come in.
#4 – Excellent Communication Skills
A successful entrepreneur is an excellent communicator. They know how to articulate their vision and inspire others to buy into it. They are also good at networking and building relationships.
In order to be a successful entrepreneur, you need to be able to communicate your ideas clearly and concisely. You also need to be a good listener and be able to take constructive criticism.
Building a successful business is all about relationships – you need to be able to build a strong network of connections and develop relationships with key people in your industry. This is where excellent communication skills come in handy.
If you want to be a successful entrepreneur, you need to work on honing these skills.
#5 – A Growth Mindset
The most successful entrepreneurs have a growth mindset. They are always learning and constantly trying to improve. They are open to new ideas and willing to experiment.
Someone who has a fixed mindset believes that skills and abilities are innate, whereas someone with a growth mindset believes that they can be developed. This opens them up to new opportunities and experiences.
The best entrepreneurs are always learning. They read books, listen to podcasts, and attend industry events. They are constantly trying to improve their skills and grow their businesses.
If you want to be a successful entrepreneur, a growth mindset is of the essence.
Final Thoughts
In order to be a successful entrepreneur, you need to have the qualities listed above. These include critical thinking skills, excellent communication skills, a growth mindset, and more.
No one is born with these qualities – they are all something that can be developed over time. If you want to achieve success as an entrepreneur, start by prioritising your own self-improvement and honing these qualities.
Book a free consultation here, to discuss any of your financial needs as an entrepreneur.
16 Jun 2023
You take your car for an MOT or go to the doctor for a regular checkup to make sure you’re in good health – why not do the same for your business?
All businesses go through good and bad times. It’s important to keep an eye on the health of your business, so you can spot any potential problems early on and prevent them from turning into a full-blown crisis.
So, how do you go about performing a business health check? Here are some key areas to focus on…
1. Your finances
This is probably the most important area to check up on. Keep an eye on your income and expenditure, make sure you’re staying within your budget, and keep tabs on any outstanding invoices. It’s also a good idea to regularly review your pricing strategy to make sure you’re still competitive.
It’s also of the utmost importance that you understand your cash flow and cash ratio. This will help you to spot any potential financial problems early on, so you can take steps to address them before they become too serious.
2. Your products or services
Make sure you’re still offering products or services that people actually want or need. It’s easy to get stuck in a rut and keep doing things the same way, but it’s important to be flexible and adapt to changes in the market. Regularly review your offering and make sure it’s still relevant.
3. Customer Retention
Are you still attracting new customers, or are you losing more business than you’re gaining? It’s important to keep a close eye on your customer retention rate, as this can be an early indicator of problems with your products or services. If you’re losing too many customers, it’s time to take a look at what you’re offering and the quality of your customer service, and see how you can improve it.
4. Employee morale
Happy employees are productive employees. Keep an eye on employee morale and see if there are any areas where you can make improvements. Regular team-building exercises and social events can help to boost morale, as well as ensuring that your employees feel valued and appreciated.
5. Your own stress levels
As the owner or manager of a business, it’s easy to get burned out. Make sure you’re taking some time for yourself, both inside and outside of work. If you’re finding it hard to switch off, it might be time to take a step back and reassess your workload. Do you need greater time freedom? Is it time to delegate, or install systems that will make your business more efficient, thus taking pressure off of you?
6. Scalability
It’s important to keep an eye on your scalability and make sure you have a plan in place for the future. How prepared are you for scaling up? Is your business attractive to investors? Is your business model repeatable, or would systems begin to break down if you expanded to another location? Getting an idea of your business’s scalability will help you to make big decisions about the future of your company.
Final Thoughts
Spotting potential problems early on is the key to keeping your business healthy. Even if it seems like everything is going well, it’s important to regularly perform checkups to make sure that everything is on track. By performing business health checks, you can prevent small issues from turning into big problems.
Would you like to learn more about business health? Book a free consultation here.
