Talk Money Week: Support for Business Owners

Talk Money Week is an annual campaign to get the nation talking about money. It's run by the Money and Pensions Service and this year's event takes place from 7th - 11th November. With the cost-of-living crisis making it even more difficult to have open conversations about money, this year's event is a vital step towards removing the stigma surrounding money and finances.

Although Talk Money Week is focused around personal finance, we recognize that it's also important for business owners to feel comfortable having open conversations about money, such as with their accountants, employees and shareholders.

This can be especially true for those who are still in the early-stage growth phase, or for micro-businesses and family businesses. This article will explore how to talk about money as a small business owner, the support services available to you and the steps you can take to protect your cash flow long-term.

Talking openly with your employees

Small business owners, especially those who are still getting started, might find it difficult to approach subjects such as sick pay, pension schemes and even negotiating salary increases with their employees. But it's important to understand how such matters can have a significant impact on both the wellbeing of your employees and your staff retention rates. There are several small steps you can take to ensure you're being open with your employees, such as:

1. Knowing your obligations

The first step towards good employee management is being fully aware of your legal obligations to staff. This includes minimum statutory sick pay, automatic enrolment of workplace pensions and national living wage rates.

It's also vital to keep up with how your obligations as an employer may change - for example, the coronavirus pandemic resulted in key changes to Statutory Sick Pay and the furloughing of employees. If you don't have an HR manager or accountant to help you with this, it's crucial to set aside time to keep on top of any employment law changes that you need to be aware of as an employer.

2. Setting out clear policies

Whether it's annual pay reviews or an increase in sick pay depending on years of service, it's important to write up clear policies surrounding how your business approaches employee pay, pensions, sick pay and other financial matters that impact your employees. Such policies could also include benefits such as discounted gym memberships, salary sacrifice schemes and bonuses.

This means your employees have something to refer to when they want to double-check what the company offers and it holds you accountable as an employer to provide fair advancement opportunities. It also promotes transparency with candidates regarding what they can expect when applying for jobs within your business.

3. Keeping the door open

With the current pandemic, it's not uncommon for there to be changes to your recruitment process or salary advancement policies. Whilst changes are inevitable, it's crucial to promote a culture of openness in your business and ensure your employees feel they have someone to go to when they need to discuss sensitive matters such as salary or unpaid sick leave. The key is to establish a culture of transparency with your staff so that they know the door is always open if they need to discuss financial matters.

The importance of a good accountant

A good accountant can make the world of difference to a small business, from guiding you through changes in legal obligations and compliance to ensuring the business is filing tax returns correctly. They can also advise you on how your company's legal structure impacts your tax payments and obligations to staff.

They will also deal with matters such as:

Payroll
Employee tax
Tax returns
Legal and compliance documents
Keeping you up-to-date with changes in tax law

We understand that it can be hard to delegate tasks when you're used to managing many aspects of your business by yourself. It can be even harder to open up to a stranger about your finances, but hiring an accountant means that you're freeing up time to focus on business growth whilst having an expert on hand to guide you.

They can also help you improve your credit score if you ever need to apply for funding, and can help you handle growth transitions, such as taking on more staff or even analysing your cash flow. Overall, your relationship with your accountant is as important as the relationship you have with your customers and shareholders, so it's vital that you take the time to find an accountant who you feel comfortable being open with.

Managing your cash flow

Having a clear understanding of your cash flow is one of the most crucial aspects of running a successful business. There are many ways that you can keep on top of your cash flow, but here are three to get you started:

1. Regular reporting
As mentioned above, working closely with an accountant is vital, as they will help detect any cash flow issues early on and identify solutions that can help. It's also good practice to run regular reports and use relevant bookkeeping software to help manage your monthly, quarterly, and annual expenses. This will help you to spot weak points in your cash flow statements before they begin to negatively impact the business.

For example, if you've noticed that one particular customer continually pays late, you can protect your cash flow by making changes to your payment terms or looking into alternative solutions such as invoice financing.

2. Monitoring sales figures
It's equally important to regularly analyse how your services or products are selling and how this compares to your competitors and the wider market. Keeping on top of this will allow you to identify opportunities to boost your cash flow, such as stocking up on a particular item that sells very well in the winter months, or having the cash ready for a supplier sale that would allow you to purchase discounted stock.

By analysing what sells best and when, you can make changes to your offering to ride the ups and downs and, ultimately, keep your cash flow stable. The trick is to ensure you're agile enough to adapt to customer needs and able to tweak your offering to reflect the changing appetite of customers. This means that you'll experience less cash flow bumps, and have the cash reserves ready in case an unexpected expense, such as a VAT bill, arrives.

3. Leasing vs purchasing
Whilst leasing equipment is more expensive in the long term, it can make an otherwise unattainable purchase affordable by breaking the cost into smaller chunks. However, many business owners can often get stuck in a cycle of leasing, without realizing that they would save a large sum of cash in interest if they were to purchase the equipment outright.

For example, the monthly interest on a small business loan may work out to be much cheaper than the interest you pay when leasing a fleet of cars. Taking the time to sit down with your accountant to calculate the difference may end up saving you some money in the long-run, so it's worth spending some time reviewing your outgoings every couple of months to see where savings can be made. Small changes such as purchasing equipment as opposed to leasing, may in fact free up cash flow in your business and allow you to take on new opportunities.

If you want to know more about how to manage your finances as a business owner, take a look at this extensive online guide covering finance and funding for UK SMEs. Or, if you'd like to learn more about Talk Money Week, it's worth reading this document which explores how to keep the conversation going.

Talk Money Week: Support for Business Owners

We take a look at how business owners can cultivate healthy conversations about money, along with outlining three steps to achieve stable cash flow

Talking openly with your employees

The importance of a good accountant

Managing your cash flow

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Managing your cash flow