When you’re starting out in business it can be tempting to spend big to make your mark and win custom.
But overspending can be disastrous for your business, after all, there’s no point in splashing out thousands on a fancy marketing material if you don’t have enough to pay the tax man.
Whatever the size of your business, if you don’t keep up to speed with your company finances you won’t have the information you need to make good decisions about your venture. Done properly, your bookkeeping will give you a clear picture of how much money is coming in and out of the business.
Too often at Ozlop we meet with troubled entrepreneurs who have been so consumed by the “day job” of working hard for their customers, that they have forgotten to pay attention to the business admin.
Let me give you a scenario: Faye opened a small childminding business, working from home and picking up and dropping off children at school.
Her books were dishevelled with no records of how much she had spent on gas and electric, equipment, petrol or food – why food…for the children!
Nine months after opening, Faye was exhausted. She was working longer and longer hours so that she earned enough to pay her own bills. Business was booming, but money was extremely tight, this was not the successful business she had hoped for.
What was going wrong?
Had Faye worked with Ozlop, she would have easily been able to put together a list of all her spending over the first nine months to highlight her biggest costs and identify where savings could be made.
She would then have discovered that she was spending far too much on food and had failed to pass the cost onto her parents of the children in her care. As a result, her hourly rate was not as profitable as she had imagined.
Only by taking a closer look at her books would Faye have been able to make an informed decision to change her fee policy to include food. Within months she would see a big difference in her earnings, keeping her in business and making a decent living from all her hard work.
If you aren’t looking at your books monthly, then this is a habit you need to adopt quickly.
Only by keeping your books up to date can you see where spending is beginning to spiral and you need to make changes.
Consider this: Are you spending more than necessary on basics such as your gas and electric? Could you cut costs and increase profits by changing broadband suppliers?
If you have a team of people, do they all need mobile phones, or could you pay them to use their own? What about your business insurance? – at Ozlop we made a £500 annual saving just by shopping around, that is a big difference for a small company.
Are you spending too much on other daily basics that build up in the background such as paper, printer ink and postage?
If you are unsure of your monthly outgoings, now is the time to get it sorted. Before long Christmas will be here and your accountant will be wanting your books ready ahead of January’s tax self-assessment deadline and the new financial year in April.
At Ozlop we specialise is helping you simplify your bookkeeping so you can easily spot red flags as they arise and make changes. If you are worried that you are spending too much and earning too little, get in touch – we may have solutions you haven’t even considered.
David Vine – small business specialist and Managing Director at Ozlop.