We all know it’s been a difficult time for small businesses. Political turmoil both in the UK and abroad, a global health pandemic, and a cost-of-living crisis, have seen the stats on new business failure in 2023 jump to record highs.
At the start of 2020, there were 5.9 million small businesses operating in the UK. In 2023, that figure had dropped to 5.6 million. Most people start their own business because they want to create a better life for themselves and their families, but the reality is that more than 60% of small businesses fail within the first five years of starting.
Seven steps to help prevent money problems
It’s not all doom and gloom for small businesses – SMEs still make up 99% of the UK economy. Up and down the country many people are thriving because they have developed proper prevention strategies that help protect their businesses.
1. Ongoing budgeting
Develop a detailed budget that includes all expenses. Regularly review and adjust the budget based on your business performance. MoneyHelper’s budget planner helps you know exactly how much you’re spending and have coming in. Managing your budget this way helps keep you in control of your money and stay on track paying off any debts.
2. Establish an emergency fund
Aim to create a money cushion that can sustain the business during difficult periods. Cashplus Business accounts come with a built-in feature called Pots that lets you set aside money for unexpected expenses, taxes and to do lists. Cashplus Pots sits alongside your main account as a separate place to ring fence money for a later date. Transfer money into Pots as and when you want and withdraw from it instantly as and when you need.
3. Track cash flow in real time
Getting the right tools to track cash flow can have a big impact on the smooth running of any business. Cashplus Business accounts feature tools designed to help you stay on top of your cash flow. With them you can:
- Manage spend and transactions in real time online and in the Cashplus app. Check your balance whenever you need and get notifications whenever money is paid into your account.
- Connect to all the leading accounting software packages like Xero, QuickBooks and Sage. Download statements to your phone and laptop.
- Track money coming in and going out of your account and create custom categories to help your organise and manage your spending.
- Digitise your receipts, tag them to transactions in your account and manage them online and in-app.
4. Develop a proper invoicing system
Creating and tracking invoices, and chasing payments, can make invoicing one of the most time-consuming and frustrating parts of running a business. With a Cashplus account you can create and send invoices automatically direct from your account online or in-app. And you’ll get notified as soon as the payment hits your account.
5. Find a business account that adds value
Look at what your business needs are and find a bank account that is going to work for you. All FSB members get specially negotiated perks on a Cashplus Business account. These include no monthly or annual account fees for the first two years and 1% cashback (up to £1,000 a month) on all qualifying debit card spending. If you’re spending regularly on your business card, then cashback is an easy way to get some more money coming in every month.
6. Negotiate better terms with suppliers
Get creative and spend time understanding your suppliers. There are often ways to negotiate better payment terms and discounts for early payments or bulk orders.
7. Diversify income streams
Once you’re feeling more confident with managing money in your current business, look at other revenue stream sources to reduce dependence on a single source. These could be opportunities for expansion or a new product or service offering.
Conclusion
Using these seven rules as a structure from which to run your business will help insulate you against much of the market turbulence we’re seeing. By properly utilising the many tools available from a modern business bank account like Cashplus, you can reduce admin and streamline operations. This in turn will help you get on top of budgeting and cash flow, giving you the breathing room to focus on the real business of running your business.
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