How to manage small business finances during the pandemic

Posted on 4th February 2021 by David Rudd

In between national lockdowns and other government restrictions, it can be difficult for small businesses to plan ahead and budget correctly during this time. If you’re a small business looking for ways to manage your finances and want to know how to increase profitability, despite the uncertainty, then here are 5 ways to do so:

1.Reducing and managing your business costs

Identify

If your business has had to limit staff, change operating hours or even close its doors – you may be paying bills you no longer need. It is worth identifying unnecessary expenditure, in particular monthly subscriptions or costs that are made monthly. If you’re using cloud accounting tools such as Sage, Quickbooks or Xero it should be easy to pull this data.

As chartered certified accountants, we have been advising our small business clients across Essex and surrounding areas to review any subscriptions and cancel bills they aren’t using. 

Negotiate

Next, you should try negotiating with your suppliers to see if they will reduce their prices. Suppliers understand the current circumstances and have procedures in place to help struggling businesses. If you can’t cancel the bills because it’s a necessity, speak to the supplier to see if you can lower the cost. As well as product and service suppliers, we would recommend looking at your rent and insurance costs.

Rethink

You should also think twice before entering into new financial commitments such as leases or capital expenditure. With all the Government grants and deals being offered at the moment, it may be tempting to sign a new monthly agreement on a company van or to take up other financial commitments. Limiting any new agreements you take out as a business during this time will help you be better prepared for any financial changes. 

2. Improving cash flow

Reach out 

As well as negotiating with suppliers on existing costs, you should consider speaking to suppliers about improving credit terms on past and future expenditure too.

Rethink

As mentioned above, if you want to improve your cash flow, you should rethink before entering into new financial commitments such as leases or capital expenditure. Although your business might have good cash reserves now, it is worth thinking about the future.

Monitor

Regularly monitoring who owes you money and who isn’t sticking to their credit terms is a great way to manage your cash flow. By staying on top of the necessary data, you can easily chase overdue payments. 

You can also use pre-existing data to plan your cash flow by looking at previous payment history which can be used to predict future payment dates. You should plan accordingly and make sure you always have enough cash in case a customer is late on payment. 

Bookkeep 

Effective business bookkeeping is a great way to manage your cash flow. Instead of just checking your balance, bookkeeping will enable you to see which direction your future cash flow is heading in.  Read more about how to protect your business by managing cash here. 

3. Understanding your business finances

Track

Most banks offer business bank accounts which you can access depending on your turnover, trading time and/or position in the company. Business accounts will offer more relevant features for your business than a personal bank account. Some of these features include low charges, foreign transactions, access to larger overdrafts, cashback options and access to cloud accounting apps.

A good mobile banking app will allow you to have access to optimise your money – with spending and other alerts – strengthen your account security, provide clarity on your data and provide better controls on your account. 

Review

During periods of uncertainty, reviewing your finances on a regular basis is critical. Finance management for small businesses can be time consuming, however, we would still recommend taking time every week to review your finances. This will allow you to understand if you’re overspending and help manage credit control. 

One of the most simple ways of doing this is by using online banking apps, however, they are limited in their ability to manage cash. Bookkeeping and accountancy is a better alternative. 

Bookkeep

As well as using it to improve cash flow, bookkeeping is a great way to understand your business finances more. 

4. Working with HMRC

Prepare

HM Revenue and Customs’ tax investigation activity has become more proactive in recent years, meaning that HMRC could be targeting your business accounts next. It is important to be wary of tax investigations into all of the taxes your business usually needs to pay (e.g. VAT, Corporation Tax, Income Tax, National Insurance, PAYE and CIS). We are now also seeing investigations into the new COVID support scheme (e.g. SEISS and furlough). 

Plan

You should plan for tax payments and deadlines, especially during this time, to avoid unexpected repercussions from HMRC. To stay ahead, it is essential to know when your taxes are due and how much they’ll be, well in advance. Our team can help you stay on top of your VAT and tax commitments, as well as notify you when they’re due.

Utilise 

Know how to take advantage of tax deferrals and what HMRC are likely to accept when negotiating a Time to Pay arrangement. 

Separate

One of the best ways to ensure your VAT is paid in full and on time, is to have a separate VAT bank account and ensure it’s regularly topped up. It is useful to have separate bank accounts to manage cash flow, including future tax bills. 

Here at Steven Burton & Co, we’re able to help with all aspects of tax and VAT.

5. Set a business finance goal 

Map out

To help with your small business growth, you should set a realistic cash flow goal. Mapping out goals and monitoring how you’re doing against these goals will help you stay on track.

Professional accountants can help you work towards these goals throughout the year. At Steven Burton & Co, we have years of experience helping to set up as well as achieve business goals, get in touch with us and we can have a discussion around financial goals for your business. 

Seek advice

Save time, save money and increase profitability by seeking a professional to help manage your business accounts. 

We are Steven Burton & Co, chartered certified accountants in Essex who ensure our client’s accounts are being run in the most efficient way. Throughout the pandemic, we have been working with all our clients, including our small business clients, to manage and protect their money. 

If you’re looking for Essex accountants to help you manage your money, then we are here to help. Learn more about the business accounting services we offer and follow our social media accounts if you’re interested in more financial resources for small businesses.