Economically speaking, the UK is in serious trouble. 2023 spells difficulty for many small businesses, as a looming recession threatens profitability across sectors. Financial literacy is key for businesses at even the best of times, but adopting effective financial management measures now can be extremely important to the longevity of your business.
How might you improve your standing concerning financial management?
Monitor Your Position
The most effective weapon when it comes to managing finances is, quite simply, data. The more you know about your business’s financial position, the better placed you are to institute actions that benefit it. This means taking more of an active role in accounting and payroll, engaging with your business’s financial information from holdings and assets to takings and monthly outgoings.
The strength of this position can change considerably over time. This is largely a result of cashflow, or the relationship between money coming in, and money leaving the business. If cashflow is negative, your standing – despite healthy profits – is poor and needs to be addressed.
Meet Tax Deadlines
While a seemingly obvious point to make, it is nothing short of crucial that your financial management efforts include the timely submission of tax returns. Failure to meet your tax obligations as a business can not only put you on the wrong side of tax legislation and open you up to HMRC investigation but also face costly penalties in the shorter term.
Following a tax guide can help you meet the various needs your year-end presents, while weaponising allowances and financial processes to minimise your obligations. For example, a proper approach to expensing can help you mitigate the impact of your tax results. Meeting deadlines is the first step in the process, to ensure no unnecessary expenditure is added to your tax-related outgoings.
Invest in Growth
Investment is the primary mechanism behind sustainable growth in any business. With the investment of time and money into infrastructural expansion, you can justify an expansion of offering – whether with regard to the breadth of your service, or the servicing of a new region.
Active investment in your business is not the only way to facilitate financial growth, though. Investing your cash holdings in key assets can help you grow said holdings, independently of business growth, and maximise your value in the process. For example, using cash holdings to purchase property can enable you to grow your cash through the property market – beating interest rates in the process.
Keep a Budget
Of course, it is important that any investment spending you undertake is trammelled by an overarching budget. Using your cash holdings to invest in assets is one of the mechanisms by which negative cashflow can occur; with money tied up in semiliquid assets as opposed to immediately available, your ability to meet financial challenges is diminished.
Setting a budget for spending, investment spending and cash savings can give you vital structure when it comes to engaging with your revenue.