This is our first guest blog of 2012 from Tax Assist Accountants. You can find him on Facebook, Twitter, LinkedIN.
1-Not preparing cashflow budget
Cash is King. This is especially true for businesses operating in today’s economic climate. It is imperative, therefore, for a business to prepare a cashflow budget to predict periods where additional cash may be required. This will enable the business time to plan for this and explore different funding options.
Most businesses don’t fail due to lack of profits but rather lack of cash.
2-Not including own expenses
When people are preparing business plans they often forget to include a provision of their own expenses. For a business to survive it must generate enough profits for the owner to live off.
3-Debtor Collection
Ensuring debtors pay on time is crucial to the survival of a business. The outstanding debtors list should be reviewed regularly and reminders sent to any balances overdue. Debt collection is a part of business the most people do not enjoy but time must be dedicated to this to ensure the survival of the business
4-Monthly purchases
For businesses that sell goods efficient buying of the goods is important.
Where too much stock is purchased it will lead to a build up of stock. If the stock is perishable this can lead to the stock going off. Stock may also become obsolete and may loose value while held by the business (e.g. technology stock have short life span).
Where too little stock is purchased it can lead to shortages if demand exceeds supply. The business may also loose out on rebates if stock is not bulk purchased. Surcharges may also apply to late orders.
5-Ignoring taxes
It is important to ensure the business is in compliance with all taxes to avoid Revenue interest and penalties. A business has certain tax obligations from the first day of trading. It is not just when a business becomes profitable that a business must submit tax returns. A sole trader must also budget for payment of income tax. Tax payments should be included in the cashflow budget to ensure sufficient cash is available to meet the liability.
6-Not keeping purchase invoices
Businesses that are VAT registered can reclaim VAT incurred on expenses incurred in the business. However, VAT can only be reclaimed where the business has kept a purchase invoice from the supplier. Failure to keep all purchase invoices can lead to business overpaying VAT.
Thanks very much Bernard O’Sullivan from Tax Assist Accountants. Please contact Bernard if you have any further questions or raise an accountancy request here.
