Business Financing, Small Business Finance
There are a number of areas here that need to be looked at identifying the different types of small business finance you might need throughout your business, depending on the size and nature of your chosen industry.
Credit
Most companies will require trade references before offering you credit or a history of trading with them, having credit facilities even though you may not use them is a handy resource can be called upon as and when required. The normal credit terms are anything from 7 days to 30 although it is common for some customers to take longer paying and this should be considered if you decide to offer these facilities yourself.
Leasing
When starting a business it can sometime require large amounts of money to purchase equipment needed to run the business, money that you would prefer to leave in the business to improve cash flow. By leasing you equipment you can reduce the amount of money you have to spend and usually you have a maintenance contract option so that you do not have to worry about the additional expense of repairs. Leasing can also have tax benefits and if unsure it is wise to seek advice with a trained professional as you could potentially save yourself a substantial amount of money.
Tax
The legal status of your company determines what level of tax you have to pay and depending on your turnover there are advantages and disadvantages with all and if unsure it is recommended that you take advice with an accountancy service many of which will provide a free initial consultation service where these type of questions can raised. It is important that tax returns are submitted within the allocated time frame or financial penalties can be incurred.
Payroll
There are a number of methods for carrying our payroll, you can do it yourself which with a suitable program can become relatively simple although it be time consuming at the outset. Outsourcing provides an efficient and cost effective solution there are a number of specialist companies who focus on just that and can provide you with some additional and valuable time.
VAT
If your company has a turnover in excess of £67,000 (correct as of Jan 09) than you are required to register for VAT, there is a large amount of help of the government website http://www.hmrc.gov.uk/index.htm and a telephone advice line so that you can calculate your VAT ‘in house’. An accountancy service can do this for you and prices can vary, it may be worth considering especially if your time could be better served elsewhere.
Companies House
Companies house is an executive agency under the government with the responsibility of ensuring all limited companies trading and non-trading submit their financial accounts and details of the shareholdings, these are public record and can be accessed via the official website. It is important that all returns are submitted within the set timescale or financial penalties can be incurred.
Factoring
This is the process where you sell your invoices to a factoring company who pay you immediately a percentage of the amount, the company then collect of the invoice and retain the difference, their fee. This process has advantages and disadvantages, the most obvious are that you get your money immediately enabling you to manage your cash flow effectively but minus a percentage cutting into your profit margin. You can also use factoring to sell ‘bad debts’ for a large reduction of their value enabling you to re coup some of your outlay. If you are considering using factoring it might be worthwhile seeking professional advice an learn what other possible options are available.