One of the major problems and leading causes of failure among startups and SMEs (small and medium-sized enterprises) is the lack of financial resources. After all, starting a business is not a cheap endeavor. It is often accompanied by a significant upfront investment in acquiring the necessary permits, property, equipment, and, at some point, attracting and hiring employees.
At these early stages of any organization’s life, it is paramount to allocate the available resources accordingly, and any overspending on the wrong operational areas could have disastrous results.
In short, most of the problems in the initial stages of the business are related to poor control of the expenses and inadequate cash-flow management. In both cases, turning to a professional service operating in your area, such as insolvency practitioners in London, could bring tremendous benefits. Do not think that you need to reach the point of no return to seek professional guidance. The experts can take into account the current financial state of the company, its operating expenses and needs, and external economic factors and create an action plan that could help it not only avoid falling into bankruptcy but emerge from the current ordeal in an overall stronger position.
Analyze The Expenses
One of the main ways organizations can improve their profitability and record increased profits is by limiting their operating and other business expenses. The exact method is going to be determined by the type of expense that is taking a disproportionate amount of funds and the industry of the business.
For example, companies can attempt to renegotiate their current supplier contracts and ask for more favorable terms, or if they are facing unbearable loan payments, they could seek to consolidate their outstanding debt and achieve better repayment terms.
Another essential point in strengthening a company’s finances is to reduce the owed corporate tax via applicable tax-deductible expenses. However, to take full advantage of the various expenses that the HRMC (Her Majesty’s Revenue and Customs) recognizes as applicable for tax deductions, businesses must have effective bookkeeping, accurate financial reporting, and sufficient documentation for each expense.
Types Of Tax-Deductible Expenses
Many business owners may be surprised by the numerous expenses that could be deducted from their owed taxes. Even more so in the current business environment where some people are running their companies from the inside of their own homes and using their previously personal devices or services.
One of the most obvious examples is using your personal phone or computer system for conducting business calls and meetings. However, you cannot claim the entire phone bill as a tax-deductible expense and will be limited to only those phone calls that were strictly related to the company’s operations. Other expenses that apply in these situations may also include a portion of the Internet or energy bills, but again, you will have to prove that the claimed amounts were part of business-related activities.
Outsource Specialized Tasks
For most startups and small companies, it is not feasible to create the necessary internal departments to handle tasks that, although vital, are not directly related to the business’s core operations. Marketing, accounting, IT management, and more could be left to professional firms that will handle all of the company’s needs depending on the chosen package of services.
Outsourcing allows organizations to reduce their current expenses by avoiding the need to find, hire, train, and then pay monthly salaries for dedicated employees. At the same time, the company can be sure that it is still receiving expert-level services at competitive pricing.
Give Inexperienced People A Chance
While many small businesses may wish to attract established professionals with vast amounts of experience in the selected industry, the reality is that it may be impossible to match the salary they demand. Instead, do not be afraid to hire less-experienced people that are nevertheless highly motivated to improve their skill set and acquire additional knowledge.
With sufficient guidance and the right opportunities, the investment in building your workforce’s expertise could deliver significant benefits in the future. If done right, this could be while exerting a far smaller toll on the current financial resources of the company.
Incorporate Open-Source Software Solutions
Instead of paying hefty sums for the corporate licenses of popular office suites and apps, look for functional open-source alternatives. Oftentimes, there are completely free programs that can perform adequately while offering most of the features found in the paid product.
However, make sure that your employees are warned in advance about any changes in the tools used in the office and that they have sufficient time to familiarize themselves with the new programs. In addition, do not take any risks with the security and protection of the company’s data. This means that the chosen products must be vetted and proven to be secure enough to be used in a corporate environment.
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