It's no secret that a business that prioritises and maintains its finances is far more likely to succeed than one that doesn't. Thankfully, in this day and age, that argument needs no revisiting. This article aims to provide three of our very best tips for business owners to utilise and subsequently take ownership of dramatically improving the health and longevity of their organisation. Whether you've been in business for 35 years or at the very beginning of your journey with a brand-new venture, for example, our three tips will provide some real clarity on the primary financial considerations for you to prioritise amongst the noise of your busy day-to-day schedule.
Below are our three key tips for setting yourself up for success in managing your business finances. In no particular order of importance:
Open a business bank account
A business bank account presents a quick and very easy way to separate your business finances from your personal, covering income, outgoings, borrowing, forecasts and savings.
One of the most common yet critical errors new business owners make is running their brand-new business through their personal bank accounts. Not only does this create unnecessary and avoidable admin in working through transactions to decipher personal versus business, but it also blurs the lines between the two parts of your life. This makes it very difficult (if not impossible!) to understand cash flow, profit levels and the general financial health of your business. Over time, this can create serious financial instability, putting your financial future under threat – an outcome that can easily be avoided.
A business bank account is also far more credible in the eyes of the customer. They will feel far more comfortable paying their hard-earned money into the account of an established organisation, with its own recognisable bank account separate from that of the staff that work there (including you as the owner).
Furthermore, paying yourself a consistent salary from a business bank account into your personal account is far more of an attractive proposition for lenders in the event you apply for finance or a mortgage. It's much easier for them to establish your lending status, and it also stabilises your credit report.
Maintain your financial records
Accurately maintained financial records are the lifeblood of any serious business, regardless of its size or scale. Not only is it a legal requirement to digitise your record keeping, accounts, tax and VAT workings across most business structures (soon to be all), but well-populated and expertly maintained financial records will keep you 100% ‘in the picture' in terms of performance.
With your records in order, you will be empowered to make informed decisions about everything imaginable – hiring, firing, investments, credit, loans, expansion plans, diversification, pricing, purchases, personal income, dividends, share schemes – the list goes on and on.
Another prevalent mistake small business owners make, in particular, is overlooking financial record keeping in favour of “I'll do it when my self-assessment comes around” or because they (understandably) prefer to put their energy into dealing with customers and generating new jobs and deals. Unfortunately, this neglect of record-keeping creates a knock-on effect. You cannot track business performance without keeping your records up to date. Without understanding how well your business is performing, you leave the future of your organisation and your personal financial affairs to chance.
Thankfully, several user-friendly digital record-keeping software platform and applications exist for this precise reason. They provide the everyday business owner and/or their accountant with a user-friendly interface to maintain records easily, integrate with bank feeds, examine business financial health, automate invoicing and credit control, run analytical reports, and (last but definitely not least) remain compliant throughout the year. Our recommended platforms for UK businesses are Xero or QuickBooks.
Invest in professional help
Working with an accountant brings immense value to you and your business. As experts in their field, your accountant can handle all the above for you, ensuring you stay on top of your finances while giving you back your time and energy to focus on managing customers and growing your business.
This simple solution can be critical for small business owners who may not have access to the required knowledge or support to manage business financials whilst lacking the time to attempt it themselves.
Further, your accountant will ensure you remain compliant with the many tax and legal obligations that a business owner must adhere to throughout a given year. They can help you to maximise tax efficiencies, create informative reports that provide valuable snapshots on how your business is performing along with areas for improvement, assist with cash flow and financial forecast reporting, applications for loans or finance, manage your payroll and pension contributions, advise on personal and business investments, consult on your personal affairs – the list goes on.
In summary
Mastering your business finances should be priority number one for any business owner who is serious about stability, growth, and success. Not only is it a prerequisite, but it is a strategic advantage worthy of heavy investment in today's complex and rapidly evolving business world.
Beginning with the implementation of our 3 tips – opening a dedicated business bank account, proper maintenance of financial records, and investing in a partnership with a quality accountant – you provide your business with an incredibly robust foundation and support network to maximise its success, and the livelihoods of everyone involved.
Whether you're already a seasoned pro in business or about to embark on a brand-new venture for the very first time, take ownership of your business finances today and reap the rewards for years to come. Please don't leave it to chance.
If you would like assistance or advice on any of the topics covered in this Knowledge Hub article, please feel free to contact our team, who will be delighted to help.
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