Whether you are new or already have a growing business it is important that you know how much money you should be setting aside each month for taxes. Because there are no set amounts and each business will vary, it can be difficult for business owners to know how much they should be setting aside. It can also be tempting to think that you will do this later in your business when you are making more money. However, it is best to figure it out as early as possible in your business so you can stay ahead of the game, especially if you do not have a lot of experience in this area.
That is why at Ascott Blake we have produced a tool that can make this an easy task for you to work out each month and help you know how much you should put aside for those tax bills when they fall due. Too often, we see a lot of people with small businesses get into tax trouble. They struggle to get ahead and then when they finally start to see success come, they are left feeling defeated from their tax bill.
Whether you are new in business or have been in business for years, this tool is going to help you get a better grasp on knowing where your money should be going. To grab this new free tool, simply go to the link below, fill out your information and you will receive an email with immediate access so you can start using it and moving forward to make sure you have peace of mind that your tax bills are always covered.
When it comes to finances and especially accounting, it can be intimidating for small business owners when it is not their natural expertise. The good news is, it doesn’t have to be. Employing an accountant is important for the obvious compliance reasons, but what all business owners need to get their heads around is the difference between profits and cash. In turn it is important to know how much cash they should be putting aside each month. This in turn will enable informed decisions to be made as the business grows and also ensure they get no nasty surprises from tax bills.
This is even more crucial at the moment with the bounce back loans being taken by businesses. Your account may look healthier than it ever has but that doesn’t necessarily tell the true story and staying on top of what your business numbers look like will help you as you grow your business.
Making sure your VAT, Corporation Tax and Self Assessment tax is covered when due is a long way to gaining peace of mind and allowing you to do what you are good at, running your business. In addition to our free tax calculator, we also have a Cash Flow Forecasting Tool that is also available for free. The Cash Flow Forecasting tool is a simple way that will allow you to work out where you stand from a cash flow point of view.
We think it’s super important that if this crisis put your business in trouble you ask the question why? Why does 2-3 months with no trading put my business at a point of failure? We can see there are huge companies going under during this pandemic so it is not limited to lifestyle businesses.
As part of your cash flow forecasting and planning you should aim to start building a reserve that allows for 3 months on non trading. Hopefully to never be needed. To know how much you need to set aside you need to calculate your “cash burn”, what is your cash burn? It is the amount of cash that will leave the business each month even if there are no sales, for example rent, staff wages, accountancy fees, loan repayments etc.
We are not unrealistic enough to think this can be created over a year, but maybe over a period of time so it’s ready for the next crisis the world throws at us as business owners. Also if you have taken the Bounce Back Loan maybe consider keeping some of this aside as cheap debt as a way to create a reserve that you pay for over time.
We often see and hear about the misconception that it’s more important to check your cash flow when times are bad. However, we recommend and encourage everyone to check their cash flow as it is just as important when times are good. Having a system in place will help you know what realistically you can afford to invest in. This includes knowing before investing in a new project, asset or staff member when you need to see a return on investment (ROI) by.
We offer cash flow forecast training and also run forecasting on behalf of our clients, if it’s something you are interested in getting in touch with us. We hope you find the tool helpful.
