woman shocked at finances

Are you reactive instead of proactive as far as your business finances are concerned?

There were lots of businesses being reactive this week – In the UK we had the tax return submission deadline of 31st January.

I was truly amazed by the number of people posting on Twitter and Facebook about how stressful it was for them getting their tax return submitted.  The poor lambs had not only left preparing their financial records until the last minute but they were also tangling with the HMRC tax return online submission programme, which according to some of the said posters was struggling to cope with the volume.

Now, excuse me, but on 31st January 2013 they would be reporting on their income for the tax year ended 5th April 2012, so at a minimum they have had 9 months to send in the information!

 

What that says to me is:
a) They have no idea of their business financials on an ongoing basis so therefore they cannot be serious about their business development
b) They are likely to have no idea what their tax bill will be, which by the way should be paid by 31st January 2013, and are therefore unlikely to have budgeted for it.
c) They clearly do not have a bookkeeper or accountant, preferring instead to have their annual stressfest each January.

If you are reactive instead of proactive do not underestimate the costs of not keeping your accounts up to date.

Had you failed to submit your tax return online, on time, then the immediate cost is £100, followed by £10 per day for each additional day that you fail to get it submitted – ouch!

It is an unfortunate fact that a lot of small business owners focus more on operating their business than they do on their books.

There are a number of reasons for this:

  • Lack of time
  • Lack of inclination
  • Inexperience
  • The perceived cost of having a bookkeeper

Lets look further into how inadequate bookkeeping, and thus a lack of up to date financial information, potentially harms your business:

  1. Do you know if you are still paying for things that are no longer of value to your business? How long is it since you really looked at your bank statements?
  2. Do you know what the costs are of providing individual products or services?
  3. Do you manage your cashflow and therefore know whether or not your business can afford that extra piece of advertising or extra member of staff?
  4. What happens if you suddenly need financial information to provide assurity for a tender or financial backing?  Suddenly you are on the back foot. Would you lend your own money to a business that had no real sense of where it stood financially? I definitely wouldn’t.

All these are the symptoms of a business that is reactive rather than proactive.

Can you really expect to grow your business if you do not understand your financial position, both in terms of how profitable it is and whether your cashflow allows for expansion?

How do you manage your books? Do you ensure that they are reasonably up to date and in-order? Do you insist on doing it yourself even though you find it stressful and have little or no idea whether you are doing it right? Have you paid a price when they were not?

Let me know in the comments below

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