7 Dec 2022

Why we need to be talking about money – now more than ever

When living in ‘normal times’, it’s crucial to have a solid grasp on your finances. But when legislation is shifting more frequently than the seasons, having all the information you can your hands on is crucial to predicting how changes may impact you.

In the UK we are notoriously bad about broaching the topic of money, but there are a couple of perceptions we regularly encounter which need an overhaul:

one – that finances are something complex to fear, and

two – that accountants are only needed when things are going wrong.

Here’s why.

Having up to date information will allow you to make quick business decisions
Being on top of your finances allows you to make informed business decisions, based on where you are and where you want to be. With up-to-date information, you can use modelling tools that play out scenarios that might be the future of your business. If you’re taking on a new project, how many staff will you need and can you afford to pay them? If you’re considering a bigger office, how is the rent going to affect your revenue?

Having up-to-date information also lessens the chances of you being caught by surprise. It allows you to be proactive and respond to situations as and when they happen. In contrast, if you don’t understand your financial position, you’re limiting your options, and even risking exacerbating issues further when the crunch time comes to make decisions.

As a small business owner, it’s not uncommon to come in on a Monday morning and find something on your desk that you were not expecting – not everything can be planned for. Let’s say you are struggling to cover a bill, so you delay payment. You eventually ask HMRC for a payment plan but you’ve waited too long and the next payment is already due. HMRC won’t give you a plan at this late stage and missing a payment can result in fines that push you further into debt. Getting behind on taxes due return can be a slippery slope.

But if you understand your financial situation, your decisions can be based on fact rather than conjecture, and you stand the best possible chance of mitigating against issues and their impacts.

Acknowledging there’s a problem is the first step
Let’s come back to that dreaded letter from HMRC; when you’re stressed the temptation is to leave it in a drawer. But it’s better to understand what you are facing in order to deal with it. I always ask my clients to send me a copy of the letter so that we can either have a conversation or I can give advice straight away, rather than ignore it.

Another stereotypical British trait is avoiding difficult conversations. If, as a business owner you provide someone with a quote or a proposal, but circumstances change and you subsequently can’t make it work for that fee, you don't have to simply make a loss. If you made a cake and it didn't work out, you wouldn't eat it. You'd make another cake. As long as you broach the conversation about prices in a fair and reasonable manner, it will never be as bad as you think.

You can’t be an expert at everything
In this fast-paced world it can be easy to feel that you should be an expert at everything, including your finances. Our clients are incredible at what that do but that doesn’t necessarily mean that finances are one of their strengths. And why assume that they would be? We can’t do what our clients do, we all have different skillsets, so try and view your accountant as plugging those skills gaps.

Nor does an accountant have to do everything for you either, they can empower you to learn to manage elements of your finances yourself, such as running month reports, or understanding what forecasts mean. By working closely with your accountant on things like business planning and financial planning, you can explore your options and iron out kinks. Determining the lay of the land is not only a worthwhile investment now, but also in the long-term life of your business.

Giving you time back
Accountants charge fees; they are providing a professional service after all, but they provide value. Once you consider what they can save you, their fee is easily negated. For example, instead of spending a whole day of your free time bookkeeping, the team can reduce this to an hour a week by making processes more efficient. Think of it this way, if you spend money on buying services but that service saves you hours in which you can earn income or use the time to develop your business then it’s a win-win situation. Monahans is here to help your business make money for you.

If it’s not broke, still fix it
Accountants and advisors aren’t just useful when something is going wrong. By picking their brains, using them as sounding boards, and tapping into their knowledge, you will inevitably learn how to make good systems better. Or take advantage of factors that you hadn’t considered. For example, a super deduction on tax currently gives companies 130% tax allowances on brand new assets. It could be that buying any assets you need before April will save a substantial chunk of tax due.

HMRC’s tax investigations activities are another prime example. Many businesses have their tax affairs perfectly in order, but this doesn’t stop HMRC conducting an enquiry and this process can be intrusive, stressful, and expensive. Monahans can take this stress off your hands via its Tax Investigation Service, liaising with HMRC on your behalf.

Unfortunately, it will always be the case that finances will cause people surprises, whether it’s a tax bill or another unforeseen circumstance. But with the right support, the perception of finances can change from something that concerns people to something that empowers them to make informed decisions about their business.

It’s not an easy time for anyone at the moment, and with more downturn on the horizon, it is anxiety inducing for many. If you need support with your personal or business finance please come and talk to one of our friendly team who will be more than happy to help.

Clare Bowen