At Turner Little, we have decades of experience in helping people set up small businesses, as well as advising on financing, trademarks and IP and offshore accounting, among others.
We’ve found that there are certain common omissions in many small business teams that can cause financial losses and problems down the line. In order to deliver sustainable growth in the current financial year, there are certain things SMEs must do.
Qualified accountants
According to research from AAT (Association of Accounting Technicians) qualified accountants, around 80% of SMEs put their financial matters in the hands of someone who isn’t qualified. This, it is claimed, leads to an average loss of about £15,000 a year.
Clearly, this is an avoidable problem, and highlighted some key threats to growth for an SME in this position. The main threats were identified as:
- Failing to properly understand cash flow.
- Failing to set aside enough capital to cover tax.
- Failing to make a comprehensive financial plan.
Steps to take
The solution lies in engaging a suitable external accountant as the first step. Someone who can give advice on a when needed basis without charging a fortune for every call. However, it’s also a good idea to upskill an existing staff member to also act as an internal accountant. This will help deliver sustainable growth and mitigate avoidable loss-making errors.
To help encourage more efficient planning and to support growth in this financial year, SMEs should do the following:
- Train a member of staff to be the internal ‘accountant’ and to understand the implications of key items within the accounts.
- Carry out your day to day book-keeping in house using something like Sage or QuickBooks; try and do your accounts daily as they are an invaluable management tool.
- Set up a reserve bank account to include a fund for potential ‘rainy day’ problems.
- Ringfence a chunk of regular income to pay VAT and tax later in the financial year.
- Strategically spend on investments that will help deliver growth.
- Plan ahead by understanding the key tax dates ahead.
Plan from the start
It is vital for small businesses to have access to decent accountancy skills at the outset. While many only access professional support up to two years after starting up, to be successful SMEs should plan it in immediately.
There are measurable long-term benefits of investing in staff training to upskill key members of staff. Experts predict that skills learned on the job by employees will still be usable ten years from now. It’s an investment in the future, and helps to give employees more confidence, improve their analytical thinking, communication skills and position among colleagues.
Avoid common errors
Most start-ups won’t have access to funds to deal with unexpected crises. This means that effective financial planning is more important than ever. These simple steps can help a small business get through tougher times and avoid common financial mistakes.
We’re only just into the new financial year, giving SMEs a decent amount of time to revamp the way they do their day to day accounting between now and the end of the 2018/2019 fiscal year.
About Turner Little
Founded in 1998 in Yorkshire, UK, Turner Little is a specialist UK and offshore company formation, banking and corporate services provider. Our services include business consultancy, company formation, UK and offshore banking, asset protection, credit correction/repair, trademarking and trusts. Other services include Internet services, mail forwarding, wills and probate. Turner Little’s vision is to offer the best possible service, together with market leading products.