Why Your Business is Letting Your Family Down

Why your business is letting your family down

Is your business letting your family down? You started a business to create a better lifestyle. Whether that’s for more money, more freedom of when you want to work, more control over decision making. Yet once you set the business up, it all seems to become a distant memory. Your business becomes this out of control “thing” that takes over your life.

At Fresh Clarity we see this time and time again. It’s often one of the reasons business owners come to us because they realise they need more help and advice.

Whatever “family” means to you, if you share your life with someone else and they are the ones who would have to pick up the pieces should the worst happen to you – how easy would that be for them to do? How much extra stress is running your own business adding to family life? You promised them you’d have more time off to spend with them, you’d have more money to create the lifestyle you all dreamed of, yet they’re not seeing this.

3 common issues that you may be facing in your business and why they may causing a problem.

#1 The work is all in your head

When you run your business out of your head with no systemised way for anyone else to know where you are with projects or invoicing customers you could be leaving your family in a mess. Bills to pay and no idea where the money is to pay suppliers. Family members can often find this quite stressful and are left feeling anxious about what would happen in this situation.

When we initially onboarded a new construction client he explained that he always felt like they had no money. When we delved deeper into the issues we found he only billed twice a year as he was too busy to take ‘time off’ to do it. His wife explained how much it worried her. She had no idea what jobs he’d been to as he didn’t keep any records of his time on jobs. If anything happened to him she wouldn’t know what needed invoicing, and she’d still need to pay suppliers & employees.

#2 You use your business for personal expenses

When you use your business account for lots of personal expenses the cost of your current lifestyle is hidden. It also leaves you at risk of higher tax charges, especially if you run a limited company. This means that if anything happens to your business, not only could your family income drop, but all those personal expenses that were funded through the business account suddenly have to be paid for elsewhere too.

We recently flagged this with a client. They were using their business account for lots of personal expenses and as we take care of their bookkeeping they were paying us to process those transactions which makes no sense at all. The client has now saved money on their bookkeeping fee as the number of transactions have been reduced.

#3 You’ve not put money aside for tax liabilities

When you’re employed, as you earn money the tax is deducted as you go along. But when you run a business it’s up to you to set aside money for the different tax liabilities ready to pay them when they are due. If you’re not maximising the use of cloud technology to keep on top of where your business is at to track your tax liabilities, it can be far too easy to spend “HMRC’s” money. Your accountant then comes along 6 months after your year end to tell you you have a £££ tax bill. I bet 2 things go through your mind. First, how can I owe that much tax when I don’t have that in the bank. Second, I’m going to have to cancel “Insert plans” as I can’t afford that now.

This happened for a good friend of ours who was happily planning their wedding. Along came their accountant in January to tell them that they had a £15,000 tax bill to pay that month. They were not expecting it. You can imagine how they felt and the tears that followed. For many business owners this continues as a vicious circle year after year and that lifestyle you wanted for your family becomes a distant memory.

Does any of this feel familiar? Well the good news is that it’s not too difficult to solve. It all comes back to setting some good foundations for your business. Having these right foundations in place will allow you to be more in control of your business and make better decisions.

So what are those good foundations? Here are 4 quick suggestions you can easily put in place.

#1 Use good bookkeeping software

Use software to improve your business. Using it correctly so that you can rely on the financial information within the software and maximising the use of it to create efficiencies within the business. For example, Using Dext to take photos of receipts, connect to suppliers and set up email rules to auto forward invoices. This frees you up from some of the bookkeeping tasks and keeps information flowing through to Quickbooks or Xero so everything is as real time as possible. Which means you can make decisions based on up to date information.

#2 Keeping finances up to date & organised

Keeping on top of your bookkeeping on at least a weekly basis. This makes it a quicker task. You only have to remember what’s happened that week, it takes less time to find any missing information and you’re less likely to have lost the receipts. No more scrambling to get your bookkeeping done because your VAT return is due that week. No more forgetting which customers you’ve done work for and giving work away for free. Set aside regular time to update things and organise your other business paperwork so it’s easy to find. Even better ask your accountant to recommend someone to take this task on for you.

#3 Ask your accountant to update you on your tax liabilities throughout the year

If your bookkeeping is up to date (even better if your accountant completes your bookkeeping) ask your accountant if they can let you know an estimate of your tax liabilities each month – corporation tax, VAT and PAYE – depending on what’s relevant to your business. If you haven’t done this before it can be difficult to start with. You’ll need to put aside the liabilities that have already built up, but it’s better to be fully aware of the liabilities than to be in the position of booking family holidays and then finding out you can’t afford it. At Fresh Clarity we encourage clients to set up a separate savings account for their tax liabilities. We send a monthly update on how much to set aside.

#4 Check everything is recorded correctly

One basic check to do at least once a month is to make sure that the bank balance in Quickbooks or Xero matches the bank balance shown at the end of the month on your bank statement. Any differences would suggest either duplicate or missing transactions. Both of which could affect your tax liabilities and business decisions.

As you can see it’s not difficult to build the right foundations to organise your business. This not only gives you more clarity and security but also your family. You just need to be willing to do it. Or, if it’s not your area of expertise, bring someone in to help you. The longer term benefits of doing this will outweigh the costs.

This is exactly what we do at Fresh Clarity, we help you organise your business so you have more clarity and confidence over your finances. Fill in a Discovery Form HERE[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row]

Leave a Reply

Your email address will not be published. Required fields are marked *