It’s the beginning of a new financial year – receipts have been furiously gathered and expenses claimed. It is a time to reflect on where your business has taken you over the past 12 months. And a time to look forward with renewed energy. We speak to business owners about the lessons they’ve learned and what they won’t repeat in 2017.
It’s all about the money
Royston Guest, founder and CEO of Pti Worldwide, a consultancy dedicated to growing businesses, said firms should look at where every pound is going.
“We have got thousands of pounds for legal fees sitting in an account which date back months. But the solicitors have still not sent us the invoices. They must have some serious cash flow problems,” he said. Managing your expenses is a key part of any business, he added.
Top tip: Get the cash flowing in – businesses often fail because of cash flow not because of lack of sales.
One micro business owner – who wants to remain anonymous – said a lack of finance knowledge, nearly cost him dear.
“I came close to hitting the 40% tax bracket and naïvely believed that all your revenue is taxed at that rate when you hit the threshold, when in fact only the revenue above that threshold is taxed at 40%.
“So, I thought the best course of action was to buy a lot of stuff for the business to stay below the threshold. I got a couple of things that were nice-to-haves but not necessary, it was only after paying for them that I spoke to my accountant who pointed out my error. It was only a few hundred pounds’ worth of expenses, but I still feel a bit foolish about the mistake.”
Top tip: Get expert advice before the tax year end before overspending.
Neil Cocker, CEO and founder of online t-shirt service RampTshirts.com, said the past year had been transformational for them after a setback.
“We sought out investment, and had long, protracted talks with investors, which sucked up huge amounts of time and money. Unfortunately, they pulled out at the eleventh hour, leaving us lost, indebted to several professional services companies, and not sure what to do.
“We launched a new platform and actively chose not to seek investment for it. Instead, we opted to completely bootstrap the business, taking the extreme, but, in hindsight, correct decision to move much of our operations to Bulgaria, where we now have a small and growing team.
“Our overheads have plummeted by 60%, while growing our team, still retaining productivity, and increasing profitability.”
Top tip: Sometimes having the courage to make an extreme change can give you fresh perspective and reinvigorate your business and the way you work.
Another small business owner told us how the mishandling of petty cash, made her change her day-to-day processes.
“As an office of eight staff, we have to buy supplies to keep the office running smoothly. From tea bags and milk to emergency print-outs, and stationery, there’s usually something needed on a daily basis. The nominated person doing the emergency supply run would usually take the petty cash from our ‘envelope’ but more often than not, would forget the receipt. While it might seem like nothing, it all adds up and the accountant couldn’t account for £800 of business money. Explaining this to the accountant, he was able to write it off as business expenses but I couldn’t help feeling like I was being scrutinised for the disappearance of the money. After this, I vowed to be better at managing the day-to-day expenses of the business and signed up to a prepaid corporate card where all the transactions are tracked.”
Top tip: Little and regular expenses all add up – don’t lose track of them.
Focus on what you’re good at
Jason Dutton, managing director of 4Networking, which has thousands of business members around the UK, said he had learned the hard way that you need to be clear about your aims.
“We’ve introduced various processes to better understand how we make money and how we spend it. We’ve implemented a clear budget, a forecast vs. actual tracking model and structured our expenditure so we’re focusing on the core of our business rather than being distracted by the ‘oh look, a squirrel’ mentality.
“What sounds like a great idea at the time can be an expensive lesson if you don’t allow yourself enough time to analyse the opportunity. I remember in a previous life running a video games company and being told we’re making a product called a ‘tow truck in a box’! Talk about a distraction. We lost sight of what we were good at, making video games, and tried chasing a quick buck. Dangerous and expensive in the long term.”
Top tip: Keep focused on your goals to hit your financial targets.
The new financial year is the perfect time for getting your finances in order. Now is the time to get a fresh start and start taking better control of important matters such as cash flows, petty cash and staff expenses. Start doing a better job of it at the start of the year and you’ll save yourself a lot of hassle when it comes to the same time next year.
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