Growth and scaling of business is top priority of all business owners as it is a necessity for any business’s survival and economic well-being in today’s corporate world but at the same time scaling of business can be hard as it takes considerable efforts, running your regular business operations along with working on its growth means wearing two hats. It means dealing with sales and marketing at the same time along with taxes and corporate compliance.
Two main tips from Accounting Assist on this are,
- To ensure that the revenues must exceed the expenses
- To Keep all the books clean and pay taxes on regular basis
The issue is that it is simple to recommend the above two but achieving them is a different story, Accounting Assist has compiled some suggestions which have been successfully used by other businesses and will help you achieve your business’s economics goals
- Keep business and personal accounts separate
In accounting one of the messiest blunders which business owners make is mixing of their personal and business accounts and funds. It ends up in a disaster most of the times.
- Keep different bank accounts for your personal expenses and business expenses even if you are a sole trader
- Establish your business as a separate entity
- Segregate the receipts record
- Use Microsoft Excel, Quick Books, Xero, Sage or any other method to track your finances and use separate tracking systems
Keeping your personal and business finances separate makes the monitoring of your profits and losses over any period quite so easy. It also plays a vital role during tax season as taxation requires a clear and balanced account for an easy and quick tax filing.
- Classify workers properly
Two choices exist when it comes to building a business team, you can hire full time employees or contractors. On one hand employees are a behavioral authority whereas on the other hand contractors are people who work for your company on a project basis.
It can be hard for business owners to classify workers properly because the penalties for disqualifying workers are steep. If the classification is not made according to the HMRC policies, the business owner may be fined in case the misclassification is intentional.
To properly classify your workers,
- You must consider all aspects of the worker-company relationships
- You must have a control over all the financial aspects of the job, including when the worker is paid, whether expenses are reimbursed, what is offered in terms of benefits, and any type of other financial matters
- You must provide all the tools and required equipment to the workers
- Calculate labor cost before you hire them
The cost of labor is the salaries and wages paid to the employees with the addition of related payroll taxes and benefits over a specific period of time. If you do decide to hire employees, the main task is calculating and ensuring that your revenues are higher than just their wage efficiency. Labor costs include expenses as
- Payroll taxes
- Bonuses
- Insurance
- Health benefits
Labor cost includes expenses other than just wages,
It is important to know that how can staff cost be lowered down without sacrificing quality of work. This doesn’t really mean to lower down your wage rate, some ways of doing so are,
- Hire labor with good skills and high specialization
- Improve your leadership
- Conduct regular performance reviews
- Have better training arrangements
- Promote teamwork
- Have good communication with the workers
- Supply them with all the relevant and innovative equipment
- Create your profit and loss statements on regular basis
Monthly or quarterly Profit and Loss statements or Management accounts are a great way to see whether you are on track to meet your financial goals or not. A profit and loss statement is actually a staple accounting tool that summarizes your company’s income and expenses over a given period of time.
- Prepare your business’s revenue statement quarterly
- For each of those quarters prepare the statement for your business expenses
- Calculate EBIT (earnings before interest and taxes) by subtracting these quarterly business expenses from the revenues
- Now account for any interest and taxes and subtract these from your EBIT
- Determine whether your company is at profit or loss
- Stay on top of your tax deadlines
Filing your tax returns and making your tax payments in time saves you from being fined and also saves you time. Failure to do so can lead your business’s contraction and hence become a hurdle in achieving your business goals hence it might be worth hiring an accountant to handle with this so that you can focus on the core of your business.
- Monitor Performance by applying Key Performance Indicators
Along with monitoring financial performance and staff performance discussed above it is also important to monitor performance of different marketing platforms and channels being used by the business and the channels which are using more resources but are not bringing in enough leads should be discontinued to save costs. Some examples of key performance indicators which could be applied are,
- Revenue per lead
- Expense per lead
- Revenue per employee
- Expense per employee
- Number of New Contracts Signed Per Period
- GBP Value for New Contracts Signed Per Period
- Hours of Resources Spent on Sales Follow Up
- Average Time for Conversion
- Net Sales – GBP or Percentage Growth
- Growth in Revenue
- Net Profit Margin
- Gross Profit Margin
- Inventory Turnover
Accounting Assist can help you with everything discussed in this article, why not
Get in touch with us today to discuss how our services can spare you time to focus on growing your business.
