Imagine your company bank account is actually your own personal money.

Would you check what’s in it?

Would you be interested to know your mortgage, food bill for the month, your electricity, the gas bill. And knowing that what’s left in the bank at the end of the month, is potentially yours to spend as you wish (your disposable income.) Then the key is to not treat your business bank account any different.

You will have fixed bills in your business just like you would personally. It’s a little different in that the Directors income is only guaranteed, once all payments have been made and accounted for. Please remember to keep money back in the account to cover VAT, PAYE, Corporation Tax and Self Assessment. The last thing you need is sudden surprises at the end of the year.

At the very least you need to be keeping a manual ledger book, even if you don’t go down the route of using Accounts software. Keep this updated a minimum of once a month. To not do so will leave you not knowing whether you are making a profit or a loss. To keep this updated regularly will allow you also make instant decisions that change the course of the way you do business.

We are still seeing far too many companies coming through the doors, not thinking this area is of important concern.

You are working in the dark, with the lights off. Be careful not to hit the wall, or the door. (an analogy I know but think about it)

If paperwork is not your strong point, after all your services or products are why you are in business in the first place. Use someone to help you, whether it be a friend, member of staff or outsource this altogether.

Talk to companies who have this already in place and ask them how they feel it has changed the way they work. If you know you are making a profit, things can only look up.

Remember the main reason for companies going out of business in their first two years is because they didn’t know they were running out of cash, until it was too late. The bank balance gives you a false sense of security, it will never tell you, you are running out of cash, until its gone.

This blog is intended for information purposes only and is only advice from past experience, you may have other suggestions of your own. It is not intended to be used to make all of your business decisions but as a guide only.

I do get asked a lot of questions about going Limited and the timeframes that small companies should consider and the options available to them.

For Soletrader

• Your records are not public and your competition cannot see any financial information on you.
• The paperwork is fairly simple to upkeep and the Self Assessment online is straight forward, which is why a lot of soletraders do their own filing.
• Suits small companies with turnover of under £100,000 with not too many transactions and complications in their accounts.

Against Soletrader

• Your personal assets are at risk in the event of bankruptcy or liquidation.
• As your records are not public, your credit score is more likely to be lower than your Limited company counterparts.
• The fact that a lot of soletraders do their own filing, eventually costs them money, as they are not necessarily aware of the tax reliefs available to them.
• They may have a limited sales market, a lot of the larger firms will not deal with small companies under a certain size as they are more risky.
• More likely to pay a little more tax as you pay profit on everything you earn, whether the money has been spent by the soletrader or is sitting in the bank.

For Limited

I tend to start asking my soletrader clients to at least consider investigating into going Limited once they hit the £100,000 turnover threshold. They are probably VAT registered and have staff working for them so are already used to extra regulatory paperwork anyway.

• Increased credit score, as your records are now public record.
• Give the impression of a profession company of a certain size. Making you more desirable to gain larger sales contracts.
• Limited Liability, your personal assets are not at risk in a bankruptcy or liquidation, unless you have placed these assets as guarantees for the company.
• There are better tax reliefs available as the Directors/Shareholders are a separate entity to the Company.

Against Limited

• More regulatory paperwork, accounts need to be prepared in a certain statutory format to be accepted by Companies House. Including the preparation of a balance sheet, which a lot of soletraders do not have prepared for Self Assessment. The requirement of an annual return, corporation tax form along with the self assessment return still required for the individual director/directors.
• There can be an increased Accountants cost for the extra paperwork required.
• Your records public, which means anyone can see them competitors, customers and suppliers too. Small companies qualify for abbreviated accounts, which contains only limited information that is statutory, so you’re not giving away your trade secrets.
• There is a lot more financial jargon, contained within the wording required for statutory accounts, and you have increased risk of getting fined if you are late in submitting the accounts.

We keep a great diary system, which reminds clients, when their dates for particular submissions are due which has been greatly received.

I hope you find this blog helpful in deciding your future business focus for the company.

This blog is intended for information purposes only and is only advice from past experience, you may have other suggestions of your own. It is not intended to be used to make all of your business decisions but as a guide only.

As the clock ticks towards 01 April 2024, businesses across the nation are bracing themselves for the significant minimum wage increase set to come into effect. With no accompanying support from governments in these challenging times, the burden falls on the shoulders of businesses to adapt and plan effectively.

The Rise of Minimum Wage

As with every year, April 1st marks a pivotal moment as the minimum wage sees a substantial increase. Workers aged 21 and over will be entitled to the National Living Wage where currently it was workers aged 23 and over. While the intention behind such adjustments is to uplift low-wage workers and tackle income inequality, the reality for businesses is starkly different. For many, this hike presents a formidable challenge, with limited government assistance.