The new year is well underway and it’s time to give your business finances a health check for 2025. While year-end is a few months away for most companies, 2025 will see a number of changes for businesses.
Measures from last year’s Budget announcement means lots of business owners are already looking ahead to 6 April 2025 and increased expenditure. According to the British Chambers of Commerce, tax increases, including higher National Insurance contributions for employers have ‘burst business confidence’.
The survey says 80% of businesses have made no investment for the past three months while they survey the situation. And others are just waiting to see how things pan out.
But taking a proactive approach to business finance is key to ensuring your company grows. A study from 2020 shows that proactive risk management is the key to staying on top of emerging risks.
It doesn’t matter what size your business is, being proactive can help you weather the storms.
Give your business finances a health check
Rather than leaving things until April, when the new tax regime begins, it’s better to get ahead. You will then know where gaps need plugging and whether you need to look for funding now before you spend too much! Here are our tips to help you give your business finances a health check.
1. Cash flow management
Business owners know that while an impressive turnover sounds great, cash flow problems can cripple a company. As the lifeblood of any organisation, cash flow plays a role in the growth of a business. Too much cash flowing out and not being replaced with cash flowing in can be disastrous – even for businesses with a full order book.
Suddenly being unable to buy equipment or stock to service your order book can lead to the end of many businesses. Not being able to fund production of goods and services means profits take a hit.
Reviewing cash flow forecasts helps you understand how cash moves through your business.
You can examine trends for income and expenses over the past year and check for seasonal fluctuations. Using data from previous years helps you predict cash flow and factor in any changes. And if you then need to improve liquidity, you can do it now, long before any problems arise.
2. Plan your taxes
We have already mentioned that last year’s autumn Budget means more cash flowing out to pay for tax increases. Tax planning is more than simply ensuring there’s enough to pay bills when the envelope from HMRC arrives.
Check any tax reliefs that you may be able to access. For example, research and development (R&D) tax relief is available to innovative SMEs. If you qualify, the relief allows you to deduct an extra 130% of your qualifying costs from your yearly profit. This could help free up cash in your business.
Reviewing dividend payments can also help you with your tax efficiency goals. And planning for tax deadlines helps you avoid unnecessary penalties.
Having an experienced accountant who can help your tax planning helps avoid those mistakes. You can speak to our team if you’re unsure about tax planning for your business.
3. Boost financial controls
Some business owners with strong order books and profits often find themselves with cash flow headaches. Some of those issues arise because outstanding debts are not being collected.
Having measures in place to ensure your invoices are being paid promptly is essential. Don’t just leave it until 30 days have passed to chase payments. Look at how your accountancy software can help you be paid more quickly. Automating these tasks can free up your time to focus on budget planning.
Consider offering early payment discounts. But make sure that your margins don’t damage profitability. That said, having 90% of an invoice paid in 14 days is better than 0% in 35! Your cash is in your account for investment or bills and keeps your cash flow healthy.
Ensure your staff understand how to spot fraud so that your money isn’t lost to scammers.
4. Revisit your budget
Budgeting for the year ahead is something every business owner should do. But many SME business owners are so busy with every other aspect of their company, they forget to budget.
Looking ahead, setting realistic goals and establishing achievable targets for revenue, profit margins and expenses keeps you ahead. Look at the business’s performance over previous years to see where you over or underspend.
As we have seen, so many business owners have low confidence in 2025. That can lead to uncertainty and failing to plan for any blips can damage your business, too. So, build in contingency funds into your budget for unexpected costs and changes in economic conditions.
5. Seek advice
If the thought of budgeting and cash flow forecasting blows your mind, then an expert can help. For example, they will not only have knowledge of the latest tax reliefs, they also have an understanding of how to read and interpret your figures.
We can help you with our tailored advice for whatever business you own.
Focusing on your finances now will ensure that your business is in better shape for the coming business finance year.