Businesses are being pushed to the limit with recent news that they are facing unprecedented delays in VAT registration which is fanning the flames of a fire already fuelled by corporation tax hikes and abolition of taper relief.
For many entrepreneurs starting out, the last thought on their mind is the bills they will be expected to pay, particularly those not associated with the initial set up of their business. Their main focus will be to make a profit but it’s also important that businesses prepare for the future. Unfortunately for many new businesses this can often be overshadowed by not considering how they will meet any future financial demands.
An increase in corporation tax by 2% may not sound like much to the chancellor, but to the UK small enterprises it signals money worries and a potential cashflow crisis. A significant proportion of small companies have reported that they have not set aside funds to cover their corporation tax bill, potentially jeopardising their company’s future financial health by having to delve into profits or resort to personal finances to find the funds.
Of course, every penny counts when it comes to starting up and it’s understandable that many owners worry about how they are going to meet the bills on a month by month basis. However, for the long-term stability of a company, this isn’t the best approach.
My advice to entrepreneurs would be to think about putting money aside each month to cover extra costs such as their corporation tax bill, that way they are not relying on finding the funds from somewhere else at the last minute. Let’s face it, there are two things that are certain in life – death and taxes – so businesses know there is no escape from the taxman!
Making your funds work harder is also advisable by depositing them in a business banking account that offers the best rate of interest on the market. Also looking at a current account that doesn’t charge above the odds for depositing and withdrawing will also help businesses make savings.
Don’t be afraid to seek advice from other sources, such as your accountant or bank manager who can advise on how to handle cash flow and budget for bills. Set up systems that make it easy to monitor incoming and outgoing funds and also determine when the business will face its greatest financial strain.
I hope that the mounting financial pressure placed on businesses is not going to hamper the entrepreneurial spirit and prevent budding entrepreneurs from venturing on their own. With smart thinking, it is possible to deal with the demands of running an extremely successful business.
