At a time when ‘efficiency savings’ are all the rage, this is a good time for small business owners to look at their own ventures, to see if there are areas where money is being wasted unnecessarily.
Here are some tips to help you cut down on the costs your business has to bear, which don’t involve having to increase sales.
1. Are you paying too much for your services?
In our personal lives, we often stick with the same insurance providers, banks, mortgage companies, and utilities companies, for no other reason that it’s easier than moving and it’s hard to find the time to research the market. The same is true in business. The chances are, you can find the same service for less by shopping around.
Think of all the things your business pays for on a regular basis – utilities, broadband, telephony, storage, printing services, your insurer, you web designer, and even your accountant. Your existing suppliers may even be happy to provide you with a discount if you just ask for it.
If you just saved just 10% on average for each of the services you regularly pay for, you would be hundreds or thousands of pounds better off at the end of the year.
2. Avoid HMRC penalties
HMRC has stepped up its efforts not only to clamp down on tax avoiders, but also to enforce its system of penalties for late (or incorrect) submission of tax information. Although a lack of time can legitimately be blamed for a number of other mistakes in business, this can never be used as an excuse for paying your tax late.
As a business owner, you are ultimately responsible for ensuring that your submit all your statutory paperwork online and accurately, not your accountant.
3. Have a separate bank account
Although we have had the lowest bank rate for over 300 years, you can still earn interest from any money you have saved in your business – whether this is profit, or money set aside to pay your tax liabilities. If you have spare funds, why not transfer them into a higher interest bearing deposit account? It is worth comparing bank accounts, as the difference in interest paid can be dramatic between providers.
4. Claim tax relief
Many businesses are unaware of the amount of tax reliefs they are eligible for. A good accountant should understand the business you are in, and which reliefs you can legitimately apply for. Just a few examples of tax reliefs include Entrepreneurs Relief (CGT relief on business assets you sell), R&D (relief for the costs of research and development), the Enterprise Investment Scheme (EIS), and Capital Allowances.
5. Tax planning
You can legitimately reduce the amount of tax by planning carefully. Once again, this is something a decent accountant should be able to advise you over. Limited company owners, in particular, have a number of options to plan the payment of dividends, for example, to distribute their profits evenly in order to minimise their personal tax liability.
The way your share capital is structured will also impact how much personal tax you pay.
You may also benefit by moving to a different VAT scheme depending on your personal circumstances, and by taking a good look at the tax reliefs you currently claim.
We will look at other ways you can legitimately cut down on your costs in future articles.
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