4 Red Flags For Limited Company Finances

Google reviews
October 26, 2017
n

It’s fair to say that manning a limited company is like steering a ship in choppy waters, hunting for a bounty on the horizon. However, you may find some leaks: subtle warnings that your limited company finances aren’t as buoyant as you thought. Bright Ideas wants every company director to stay attentive of these threats to their income, because they will likely affect you at some point along the way. Read on for our top four alerts that your earning potential may be under threat:

1. Blockages in your cash flow

We can fall into the trap of establishing a business model, then leaving it to tick over, placing too much faith in the outcome. Cash flow can be undermined by many things, all of which are preventable if you can root them out.

The overheads, for instance, may be too high. You can cut your utilities or inventory (office rental, equipment, raw materials) down to a size that makes economic sense. In the same token, you could apply for any credit loans way in advance of when they’ll be used, so your investment funding doesn’t run dry.

2. A lot of outstanding invoices

There’s nothing as frustrating – or detrimental – as an array of payments you’re expecting, when they’re lost in the scrum of your responsibilities. It’ll lead to missed deadlines for what you owe to others, and mess with carefully built forecasts.

We recommend late payment penalties on your invoices – that way, no-one has the excuse of ignorance. They can see how the amount will increase if X or Y date isn’t met. And furthermore, it’s a good idea to keep tabs on who’s received each invoice; this is where a bookkeeping tool like FreeAgent can prove its worth to your company.

3. Failing to label your ‘wage’ and ‘dividend’ payments

One of the main reasons for going limited is the tax breaks achieved when we split our income into a basic wage and a dividend. To do so, it’s imperative to make each payment separately– you can’t just lump them together, identifying ‘X amount is a dividend’, and relying on the good will of HMRC.

Hiring an accountancy service like Bright Ideas is part of the solution, as we’re used to double-checking the payroll for dozens of companies across the UK. We’ll ensure the tax-friendly strategy is identified as it should be, every time you take home cash for yourself.

4. Growth is eclipsing your micro-management

‘Progression’ is, obviously, a great word for entrepreneurial spirits. We should try to grow as much as we can to boost income and opportunities. Despite this, problems may crop up when a business owner is in the habit of checking everything themselves… receipts, stock orders, client relationships, or anything relevant to key processes.

Growth can run away from us; the best thing to do is stop micro-managing, and outsource/hire more staff for roles that require a lot of time or expertise. In terms of your finances, that’s something we can help with…

Bright Ideas accountancy can form a package for a robust, healthy hand on your cashflow and financial investments. We’ll check your books, examine how costs are stacking up to previous trade periods, and review the payroll for up to four employees, if necessary. Call us on 0161 451 3924 or email info@biaccountancy.com for a longer rundown of our services.    

Limited company finances

Resources

Recent Articles

Businesses look to increase home working

Businesses look to increase home working

The number of businesses planning to increase home working for staff has risen according to the latest official figures. In late May 2024, around one in five (19%) businesses said they either had or were intending to raise the number of staff who are working from...

HMRC app helps with student finance applications

HMRC app helps with student finance applications

An app from HMRC which provides information such as your National Insurance number and tax information has been flagged by the taxman to help students completing their A’ Levels this year and planning to head to university in September. Anyone who is applying for...

Want to avoid fines from HMRC? Here’s how

Want to avoid fines from HMRC? Here’s how

No-one likes to pay more to the taxman than they have to, but if you fall foul of HMRC’s rules, you could find yourself paying a penalty, and interest if things are not sorted out quickly. There are various fines you could face from HMRC if you get things wrong, and...

Ready to join us?

Whether you’re a contractor, freelancer, or small business, Bright Ideas can help remove the burden of time-consuming and complex finances. We’ll draw on our years of knowledge and experience earned helping sole traders just like you.

When you choose us, you’ll be assigned a dedicated Account Manager who’ll provide one-on-one support that’s customised to your business. Communication is key, so we’ll always answer your questions or requests as soon as we can. In fact, we offer a same-day response guarantee for emails and calls received before 3pm.

Contact us to get started

Give us a call us or send an email today!

Looking to switch accountants?
We make the transition simple.

Does your current accountant give 1-to-1 support? Are they fast and thorough?
Slap-dash services hold businesses back, so try our experts instead.

Move to an accountancy service that goes the extra mile…

Start the conversation

Let’s make your finances Brighter

Call us Monday to Friday 9am - 5pm

0161 669 4221

Request a call back