By Emily Coltman FCA, Chief Accountant to FreeAgent
With the start of the new tax year now underway, it’s the perfect time to think about how you can boost your business over the next 12 months.
But what areas should you actually be looking at that will help your business run more effectively in the year ahead? Here are five changes to make in your business that could have a major impact on your performance:
Improve your bookkeeping
Few people like managing their business books - but although it’s not the most exciting part of your working week, it’s certainly one of the most important! Without well managed accounts, you’ll struggle to know how much money you’re making or how much tax you need to pay.
But to avoid getting bogged down with the nitty-gritty of managing your finances - or leaving your papers to pile up and then having to spend hours organising and cataloguing them - the trick is to do a little bit regularly.
At FreeAgent, we reckon that if you dedicate just one hour a week to your business finances, you’ll not just save time on the admin work, but will suddenly have a chance to work through all those bigger-picture financial questions, like “how profitable is that client?”, or “how do I plan for seasonal business?”
Your hour can be used to stay on top of your invoices and chasing up those clients who haven’t paid you, as well as managing your bills and reconciling all the unclassified bank transactions in your accounts. And, provided you record all your expenses as you go, you shouldn’t have to spend any of that time scanning and logging a huge stack of receipts every week.
Once you’re routinely spending time on your books, you’ll then be able to see accurate, timely information about your business - including which projects are earning you money and what your up-to-date profit & loss account looks like. You’ll then be able to take that information and make informed decisions about what direction to take your business in next.
Review your customer list
Although it’s a good idea to keep your customers happy, it’s important to remember that not every customer will necessarily be beneficial for your business. For example, you may have someone on your customer list who insists on holding unnecessary meetings or spends ages quibbling over the most minor details of the work you do for them. Or perhaps a customer who routinely takes ages to pay you, or argues over the price that you’ve charged.
If you do work with these types of customer, you may want to think about whether you can cross them off your list. Provided your business can afford to do so, it might be best to point them to another supplier - and then use the time you’ve saved to look for new, less-problematic customers to work with.
But remember, overhauling your customer list doesn’t need to just be about getting rid of problematic customers. If you have great customers who love working with you, why not ask them to refer you to their friends? You could even introduce a dedicated referral scheme so that they receive a reward for every person they successfully introduce to your business. Personal recommendations can often be the most powerful form of advertising that your business can receive.
Open your business to wider markets
With the new tax year about to begin, it’s a great time to consider taking your business down a new avenue. Could you start making a new product - or even offer a new service to complement your current operation? Provided you’ve got a good business case and have reviewed all of the potential costs and found that your business can afford to branch out, this could be the best way to increase your turnover, attract new customers and improve your profitability.
Alternatively, could you join the growing number of small businesses who are selling to different countries? Online businesses, in particular, can easily sell to anyone, anywhere - so why not check out sites such as Alibaba (for goods) and Elance (for services) to share what you can offer worldwide and broaden your horizons.
Pay your taxes on time to avoid penalties
If you’re running a small business, it’s likely that you’re going to have to pay tax on your earnings. But unless you’re well organised, it’s easy to lose track of your what tax you owe and when you have to pay it - which means you could end up missing your deadlines and be fined by HMRC.
So make sure you keep a diary of the key dates when your tax is due and try to put money aside each month so that you can pay your taxes on time. Use a different bank account to keep this money safe if that would help you remember not to spend it.
Remember - if you file your returns and pay your taxes on time, this will not only avoid interest and penalties from HMRC, but will improve your relationship with them. It’s never advisable to get on the wrong side of the taxman!
Don’t be afraid to ask for help
It’s easy to get into the mindset of believing you need to do everything in your business yourself - but in practice that’s not necessarily realistic. And even if you feel you have to shoulder all of the responsibility of working problems out yourself, you may end up spending ages trying to find an answer; and your business is likely to suffer because you’re dedicating too much time on the problems and not enough on the other parts.
People generally like to be asked for help and you’ll be surprised how much assistance you’ll get if you look in the right places. Use your network, ask your contacts for help, and build more relationships so that you’ll always be able to ask an expert for advice - or at least get advice for where else to look.
And don’t forget to share your expertise in return. If you’re expecting people to help you, you may want to return the favour and offer some of your own skills to those who need a helping hand.