Welcome to our small business outlook 2015/16.
Although not all small businesses have seen an improvement in their financial performance in the last 12 months, the picture is largely positive. The UK economy thrives on small businesses and, generally speaking, they are performing well regionally and internationally. There are, however, a number of financial and strategic challenges facing many and it is essential owners understand the potential implications each may have on their small business. Some of those challenges also bring opportunities – big opportunities, as you will see.
Managing rising costs
Rising costs is arguably the challenge that preoccupies most small business owners’ minds, particularly those in sectors with very tight margins, such as dairy farming and e-commerce. While certain costs – like the onset of auto enrolment – are out of your control, there are other areas where you can make savings. The starting point must be to look at tax. Are you maximising available reliefs and minimising liabilities? There are a large number of generous tax reliefs which are widely available to small businesses, but they are often overlooked because owners do not necessarily know they are there or that they even qualify, such as R&D tax credits.
Preparing for auto enrolment
The law on workplace pensions has changed and by 2017 every organisation in the UK must automatically enrol their employees into a company pension scheme. The ability of pension providers to provide solutions is becoming a real issue due to large numbers of small businesses being enrolled in a short period of time. The fourth quarter of 2016/17 will see approximately 215,000 small businesses enter into auto enrolment alone! Our advice is to prepare early, which could reduce your costs.
Getting paid on time
Late payments are still a big concern for many small businesses in the UK. Research shows that a third of businesses in the UK say that at least 20-30% of their debtors are constantly overdue. The impacts of this are considerable, particularly on cash flow, which makes the day-to-day running of the business much more challenging. A proactive credit control system is a must.
Not enough hours in the day
Running a successful small business usually means you are focused on looking after your customers, growing sales and improving profitability. It also means you are on top of your finances with up-to-date, accurate information so you can make well-informed decisions, improve profits and manage cash flow. There’s a lot to keep track of and it is no surprise that one of the biggest challenges many small business owners face is simply not having enough hours in the day. There are opportunities here though, particularly through technology, in terms of cloud accounting, bookkeeping and outsourced payroll. Outsourcing such roles is simple and cost-effective, giving you more time with customers and freeing up time for you to grow your business.
Embracing digital change (from accounting to marketing)
There are many instances where technology can help a small business enhance performance and grow, whether it’s through attracting new clients, having access to real-time data or improving operational efficiencies. Investing in technology should certainly be high on the agenda and, in particular, you should be considering the huge benefits that cloud accounting can bring and the effectiveness of your website – do you attract new clients online? The world is Googling and you need to have an online presence. Other big technological opportunities may be sector specific, such as 3D printing in manufacturing or precision farming in agriculture. Some key challenges within this are a reluctance to redesign traditional methods, a lack of digital and technical expertise and funding capacity.
As you can see, there are challenges and opportunities aplenty for small businesses in 2015/16. Now, with the drama and uncertainty of the General election behind us, we can focus on the future. With innovation and technology set to continue to drive small business development – with considerable time and financial savings – let’s hope growth continues on an upward trend.
For more information on how one of the leading firms of small business accountants can help you, please contact Hawsons today.