No matter what kind of business you run, there are financial matters to be dealt with as well as the core activities. Sometimes, small business owners struggle with this aspect of managing their operation – the core activity is not usually a problem because you are engaging with circumstances and projects with which you are familiar. Finances, however, can be a stumbling block unless you take the time to understand the requirements. Here is a quick guide to what you need to know and what your options are.
Buying and selling
At a very basic level, your business operation consists of buying goods or someone’s time and skills, then selling a finished product or professional services. Even if you are a sole trader, the cost of your materials and time need to be financially accounted for and offset against the income you earn.
There are specific calculations you can carry out daily, weekly, monthly or quarterly that will keep you informed about how your business is performing and what progress you are making. However, you need to be aware of what these calculations are and when you need to undertake them. Understanding this means acquiring financial acumen or the ability to make shrewd judgements based on experience and knowledge.
Another important area for business owners is keeping an eye on changes to government legislation that affect all enterprises, including contractors, sole traders, partnerships and some limited companies. For example, it may be wise to take IR35 advice from a reputable source if you are not familiar with forthcoming changes that may affect your tax and national insurance liabilities.
If keeping track of this seems too onerous and you would prefer to focus on running and marketing your business, one way forward is to consider using an umbrella company to provide expert advice and assistance. Umbrella companies use PAYE tax methodologies to process the income received by their clients, so you will never find that you are unknowingly operating illegally and therefore liable for a fine, as can be the case if you are paying yourself using dividends.
Building your business
In the early days of an enterprise it can be extremely helpful to make the most of outsourcing necessary jobs, but that may deflect your attention away from the core business activities. Some entrepreneurs opt to hand their marketing activity to an agency or individual who has the right kind of connections and knows how to do a good job quickly and effectively. Financial acumen does take time to acquire, so this is an area where you might benefit from outside assistance and advice. Other ways in which businesses can benefit include outsourcing packaging, logo design, social media engagement (often part of marketing) and secretarial or telephone-answering services.
In addition to the protection afforded by, for example, using an umbrella company to provide payroll advice or an accountant to manage the books, many businesses also save money while freeing themselves from the burden of spending time on work that is better done by people who are more experienced and knowledgeable in financial matters.