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With so many businesses suffering from the impacts of the pandemic, it is more important than ever to ensure that your business is financially stable. That’s why we’ve looked into some of the common financial mistakes small businesses make when first starting out.
Not Familiarising Yourself With SBO Legislation
Through time and experience, you will find that you become familiar with much of the legislation surrounding tax and accounting for businesses in the UK. But many small business owners (SBOs) start out with little knowledge on issues such as VAT Return deadlines, what costs to include, and when to file accounts.
That’s why it’s a good idea to get professional advice from an accountant in the early days of your business. With a good accountant on hold, you can take your time getting to know the ins and outs of business finance, while resting assured that your finances are in good hands.
Not Setting a Clear Budget
Budgets are imperative for a business to succeed. You may be able to survive without a clear budget temporarily, however once your income and expenses start to grow, it will become more difficult to calculate what you can and cannot afford to spend each month.
A successful business needs a carefully planned budget to help allocate funding to operational, marketing, and other expenses. Setting a clear budget helps you to increase your financial discipline and creates a clear pathway for business growth.
Not Having A Separate Business Account
When starting out, many people make the mistake of combining their business and personal finances. Even if you are the sole employee of your business, it is important that you keep your business finances separate from your personal finances.
While using your personal account may seem convenient, you should commit yourself to creating separate savings, checking, and credit card accounts for your business. This will make it much easier to do the accounting for your business, plan for growth, and budget for unpredictable times that may lie ahead. It also prevents you from suffering personal financial losses in the case of business emergencies.
Not Having Suitable Business Insurance
Having business insurance for your company eliminates financial risk from unforeseen and unpredictable events. Unfortunately, many SBOs choose policies which do not fit their business needs, or make the mistake of cancelling their coverage before having a new policy in place.
Not retaining the appropriate insurance coverage can cost businesses dearly in the case of legal or financial disputes.
Having No Emergency Savings
Business emergencies can impact your inventory, your vendor payments and worse still, your customers. Think about the impact which the pandemic had on so many companies. Most small business owners don’t think about rainy day funds, especially when they haven’t started to make a profit yet. However, building up a budget from the start is the best way to ensure your business is prepared for all eventualities.
The best trick to start your emergency savings is to treat it like any other monthly expense for your business. Most experts advise six months of operating expenses for an emergency fund.
For further information, or guidance on your own business finances, get in touch with our team today. We’re always happy to discuss the accountancy services we offer that can help your business to thrive!