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It's a depressing fact that starting up a small business is an extremely risky venture. Around 660,000 new companies are registered in the UK every year – that's the equivalent of 70 per hour! Sadly, however, 60% will go under within three years, and 20% will fail before they've reached their first anniversary, which is a lot of hopes and dreams gone up in smoke.
There are many reasons why businesses fail. High business rates, consumer habits changing, lack of a clear business plan - sometimes it's a simple case of a new entrepreneur who is just not up to the job. However, one of the most common reasons for failure is a lack of focus on the finances and the legal implications this entails. Here are four signs that you might need some bookkeeping assistance:
More small businesses fail because of cash flow issues than for any other reason. A cash flow forecast tells you how much money is going out and coming into your business, and you should be able to pinpoint your level of finance at any given time. This is essential for your future planning, because you can't make strategic investment decisions if your cash flow projections are inadequate.
Is your desk neat and tidy, with all your transactions entered on your accounting software? Or can you barely see it for papers and old receipts? You'll need those receipts for managing your petty cash and your VAT returns. Don't forget that VAT is not part of your cash flow and will have to be paid back to HMRC. The longer you leave the filing, the more difficult it will become. This leads neatly into our next topic:
It's easy to work all hours growing a new business and end up leaving all the essential finances for another day, but time and HMRC wait for no one. When you finally get around to your tax return, it can seem overwhelming. In October alone, for example, you will need to meet the deadline for registering income not fully taxed, or any capital gains tax liabilities for the relevant tax year. Income tax and PAYE are due under a voluntary PAYE Settlement Agreement, and it's also the self-assessment paper tax return closing date. Missing these, and numerous other annual deadlines, could have fatal consequences for your business.
There are many different accounting packages for small businesses, and you need to look carefully at the different options. Choosing one tailored to your specific requirements with all the vital cyber-security checks is essential, and it should be user friendly. Remember to make regular back-up copies, as losing all your data could be disastrous.
If you're starting up or already running a business, whatever the size, you'll know how all-consuming it can be, and how easy it is to let essential admin slip. At AMR, our friendly and professional team will advise and support you with all your bookkeeping requirements, leaving you free to concentrate on growing your business. Get in touch, to find out how our services can help you.