You run your own business.
You are good at what you do.
It’s all consuming.
Cash-flow is always an issue.
You pay little tax.
Your business is your biggest financial asset.
One day you’ll sell it for a song!
Recognise yourself or anyone you know?
I would like to pose a question to business owners. Do you really know what’s going on in your business? If you were going to sell your business today would you really understand the net position and what the tax implications would be?
I’m asking simply because I have met a number of business owners recently who are very good at what they do but have been unaware of the endemic risks within their business. One of the biggest issues is around tax and cash-flow.
Many business owners don’t understand their accounts. They know what’s in the bank. They know what money is flowing through the business but they don’t understand their financial position. “That’s what I pay the Accountant for” is what I’ve heard many times. So, it’s the Accountant’s fault then? Maybe this is true in some cases but in my experience the accounts are not deemed by the business owner to be a true reflection of the ‘heartbeat’ of the company and are not given a great deal of attention. They are often viewed as yesterday’s news.
This has come to our attention a couple of times in the last three months. We have tried to create financial plans for the clients in question but without realistic and accurate financial data this has proved very difficult. When stripped down to basic principles, we go to work to earn money and fund the life we want. But, if you don’t really know your financial position, how can you plan ahead?
With the changing rules around dividends coming into force in April 2016, it’s more important than ever to understand the dynamics of how your accounts and cash-flow work together. The new legislation is likely to alter the way in which business owners take remuneration, which may manifest itself in greater cash-flow issues down the line.
