Partner Article

Bad accounting habits lead to poor cash flow?

When it comes to startups and SME’s many business owners believe that setting their prices low will help to win over customers. Many believe that if they charge too much it will deter customers from making a purchase. However, some business owners often decide to charge to little meaning that they actually don’t make any profit. Running a business can often be stressful and can lead to many bad accounting habits which in the long term can lead to poor cash flow, late payments, accumulating debts and can even lead to your business being closed down permanently. As a result, it is important to research your competitors and charge people what your service or product is worth. Always remember that you are trying to save your customers both time and energy as well as any money they would have to pay if they went with one of your competitors.

Online accounting systems are a great way to manage your accounts in real time, helping to ensure that each service or product is profitable. This too will also help to manage your cash flow better, making sure that you are charging enough to cover your costs and make a profit.

Not claiming all your expenses can also have a negative effect on your business. Although ‘doing the books’ can often seem boring and tedious, it is perhaps one of the most crucial parts of running a business. Avoiding this important step can often lead to receipts from business costs that have been paid for personally being mislaid and never actually ending up in your business account. As a result of this, it will leave you personally out of pocket as your business will not reimburse you for the cost. In addition to this, your business will also face paying too much tax as you will not be able to claim relief on those expenses.

If you find yourself struggling to manage your expenses and cash flow, Positive Collections offers a FREE credit control system which enables you to improve your cash flow and reduce paper work, whilst saving both time and money. This invoice management system is ideal for sole-traders, freelancers and small businesses. For further information simply call them on 0208 313 7887 or visit them online.

Not collecting your money within a strict time frame can also lead to financial difficulties. Many businesses fail to chase up payments quickly out of fear they will offend or potentially ruin their relationship with clients. In this circumstance, it’s important to remember if you have done the work you should get paid for it because without payment you will not be able to cover your own bills. Businesses cannot survive without a healthy cash flow.

In order to try and avoid late payments, always ensure that you are setting clear payment terms so your clients know exactly when to pay you. If this is a factor which concerns you and your business, perhaps it is worth investing in an invoice management system. Positive Collections offers a FREE online credit control system which is both simple and straightforward to use. These type of systems are ideal for chasing payments quickly.

Meeting your own deadlines is also an essential factor to running a business smoothly. Paying your tax returns and VAT should always be paid on time to avoid HMRC sending you a yellow subcharge form, charging you more money if you fail to pay on time again. Falling into this routine is not good for business, so ensure that you always know exactly when your deadlines are. If you are unable to pay you must notify the HMRC before the deadline, otherwise you may face paying interest, subcharges and even penalties.

This was posted in Bdaily's Members' News section by Martina White .