Every business needs to stay on top of their finances. Here’s our guide to managing your business tax, budgeting and cashflow issues.
Paying the right amount of tax
It’s important that as part of your financial planning, you look at your business tax situation. Penalties can be severe if you don’t pay the tax that you owe, or if you miss a payment deadline.
Taxes you might have to pay include:
- income tax (for self-employed individuals and partners)
- corporation tax (for limited companies)
- value added tax
- capital gains tax
- stamp duty
It’s a very good idea to get advice from a professional accountant on your own personal tax situation – they can help you with paying the right amount, filing your returns accurately and on time, and any tax breaks you might be entitled to.
HMRC also provides guidance on all aspects of paying your business taxes.
For details on all aspects of registering for income tax self-assessment, including deadlines, calculating the right payments and how to file your return, visit https://www.gov.uk/personal-tax/self-assessment.
For advice on paying the right amount of corporation tax and filing your company tax return, see https://www.gov.uk/business-tax/corporation-tax.
To see guidance on registering your business for VAT and submitting VAT returns, see https://www.gov.uk/business-tax/vat.
To find out if you might have to pay capital gains tax on your business assets, visit https://www.gov.uk/capital-gains-tax-businesses.
For advice on paying stamp duty (on the lease or purchase of business property, or of shares), visit http://www.hmrc.gov.uk/so/index.htm.
Budgeting and cashflow
Another key aspect of financial planning is preparing budgets. You should create a realistic and accurate sales budget – how much money you expect to turn over – and expenditure budget – what you expect your costs to be.
If you’re a new business it may be difficult to estimate potential sales and costs. Gather as much information as you can, and keep revising as you know more.
A properly prepared budget will help you identify any upcoming problems and make adjustments before they harm your business – eg by reducing costs if sales are lower than you expected.
It also helps you anticipate problems with cashflow, by plotting the movement of cash in and out of your business account and identifying potential points where you won’t have enough to cover necessary payments.
In the long term, you can compare what you expected to happen in your budget with what actually did happen – and investigate the business reasons why.
Avoiding bad debts and late payments
Bad debtors – people who owe you money but don’t pay on time, or at all – can severely disrupt cashflow and even lead to a business being unable to trade.
To stay on top of late payments, keep track of your invoices falling due and when they’ll become overdue. Your book-keeping system might be able to automatically identify these. Once they start falling behind, chase up payment politely but persistently.
Offering a prompt payment discount may convince debtors to pay on time. You could also restrict credit to new customers, or carry out credit checks on them, to reduce the risk of them running up a debt they won’t pay.
In extreme cases, you could sell bad debts to a debt collection agency or even take court action.
This article is provided only for general informational and educational purposes. It is not offered as and does not constitute legal or other professional advice on the subject matter in question. You should not act or rely on information contained in this website without first seeking professional advice on the subject matter in question.