If you want to make your start-up business more profitable, alongside the quest for more sales, and better margins, there are a number of things you can do to make your new business more efficient.
Here are some ideas to help you improve the way you run your business, so you can add to your bottom line just by being more efficient:
Avoid HMRC penalties
You should ensure that you submit all tax and statutory documents on time (VAT, Annual Returns, Self Assessment, Corporation Tax, etc.), and pay what you owe before your deadlines. Otherwise, you will be charged a penalty by HMRC, which is often a percentage of any outstanding tax. If you are a repeat offender, the costs could be significant, and are completely avoidable.
Keep on top of late payers
Poor cash flow management has been the death of many a small business. From day one, you should put in place a system (perhaps via online accounting) so that you can see at a glance what is owed to your business, and which invoices are about to be late.
Make sure you send out reminders to encourage customers to settle your invoices on time. Get a central point of contact in the accounts department of any regular customers, and be persistent when chasing slow payers. Put your payment terms on all company paperwork, and don’t be afraid to charge interest or even use a debt collection agency for persistent offenders.
You should always open a separate business account from your personal one. This is a legal requirement if you have set up a limited company – as the company and its directors are separate legal entities.
You don’t have to have a separate business account if you are operating as a sole trader or partnership, but it’s highly recommended you do as it’s far easier to keep on top of your finances if your business transactions are kept distinct from your personal ones.
It’s also wise to keep any forthcoming tax liabilities safe in a separate savings account, and seek out the highest interest bearing business accounts for any spare cash. Despite the lowest base rate in UK history, you can still get a reasonable return on your investment if you shop around.
What are you claiming for?
Many small businesses are in the dark about what they can claim for, such as business rates relief, capital allowances, or even standard business expenses. Talk to your accountant to establish what you can and can’t claim for.
If you are running your new venture as a limited company, one of the various advantages you have over the self employed route, is that you can take advantage of some clever tax planning.
For example, if you have had a particularly profitable year, you could delay declaring dividends until future years when business may not be so good, and minimise your exposure to higher rates of tax on your income.
You could also consider gifting some of your shares to a spouse or partner. This is particularly beneficial if they do not have an existing source of income, as they will be able to use their annual tax free allowance.
You should always discuss your tax situation with an accountant before relying on any information contained in this article.