Great business ideas and bold marketing plans are useless if you do not budget carefully. In this article we explore some of the most common budgeting mistakes and how you can avoid them.
Do not count taxable amounts as company holdings
It is easy to forget that the balance in the company’s bank account does not represent the true holding value of the company. Remember that if you exceed the VAT threshold, a certain amount will be owed as VAT each quarter and that you will have to pay corporation tax at the end of the company’s financial year. By counting the entire amount of what is in the bank account as holdings, you risk making purchases that the business cannot afford.
Do not ignore your cash flow situation
Cash flow problems are caused by a time lag between when you pay your suppliers and when you receive money from your customers, and they are at the root of many companies’ failures. Try and manage your cash flow by chasing up late payments and not spending money that you have not yet received. Do not over promise and under deliver
It is often the case that you can generate repeat business from existing customers and that it is easier to do this than to hunt for completely new business. By over promising and under delivering you risk disappointing your customers and losing any future business that they may have put your way. It is far better to under promise and over deliver so that you exceed their expectations.
Do not mismanage your advertising finances
When building the cost of advertising into your business accounts be careful not to show these costs as a percentage of sales in the same period. Bear in mind that advertising normally takes a certain amount of time before it yields sales. Make sure that you have accumulated an advertising budget before you commit any money and that you have built projected returns properly into your accounts.
On Stop‘s Improving and Managing Cashflow Programme is designed to accelerate payment and alert members to customers with bad payment histories.