Keeping Your Business in the Black: Precautions to Avoid Debt in the Long Run
Most small businesses make a small loss in their first year, with very few even breaking even. However, it’s important that you don’t allow your company to rack up debt that you might be unable to repay. You also want to see profits coming in in the long run, rather than digging increasingly deeper into the red. So, how do you keep your business afloat and in the black? Here are a few tips and tricks to save your company money and avoid serious debt.
Keep Your Business Finances and Personal Finances Separate
You are your business but it’s always advisable to keep your business finances and personal finances completely separate. Whether you are just starting out or have already established your company, it is essential that you treat it as a viable entity. First things first, ensure that you have two separate bank accounts: one personal account and one business account. The key to ensuring that these remain separate is to have all profits from sales going into your business account and assigning yourself a salary from this. Pay this directly into your personal bank account, rather than using your business account to make purchases. This makes it more simple to monitor what you have for personal use and what you have to reinvest back into your company. Have all personal direct debits set up to come out of your personal account, with business bills (commercial rent, overheads, etc.) coming out of your business account. This makes your finances easier to track and is tax-smart. You’ll truly thank yourself when it comes to sorting your taxes at the end of the financial year. It also ensures that you’re not spending more for personal means than you can afford. You will have to live within your means.
Protect Your Intellectual Property
When you set your business up, it’s essential that you protect your intellectual property. You don’t want others to be able to make a profit from things that you have spent time, energy and cash developing. First, you will want to copyright and trademark various aspects of your brand. These can include your company name, logo, typeface, taglines, color schemes and even jingles or catch phrases. The process of protecting these facets of your business is short and relatively cheap. It will ensure that you gain all of the profits made from your hard work and will allow you to take action against others who plagiarize or steal from you, prosecuting them and becoming eligible for compensation payments.
Protect Your Intangible Property
So many aspects of your business will rely on technology. You will have hundreds, if not thousands, of documents and files to store: training documents, briefs, product descriptions, product specifications. The list goes on. The loss of these documents could result in lower productivity and delays in other areas, while you attempt to replace the work that you have lost. Perhaps most importantly, you are likely to store all sorts of private and confidential customer and employee information, such as bank details, card details, delivery addresses, email addresses, and passwords. Identity theft will cause your business to gain a negative reputation and will see you make losses, as customers won’t be confident in the reliability of your service. If hackers get hold of your information, you could also become a victim of their crime, with money being stolen from your bank accounts. Cyber crime is consistently on the increase and there are individuals out there who will attempt to steal this private information if they are allowed the opportunity. This is why you need to invest in cyber security. Remember, from the 25th May 2018, new GDPR regulations will be enforced, meaning that if your business isn’t cyber secure and you are not adequately protecting data, you will be fined the hefty sum of 4% of your company’s annual turnover. So sort this situation out sooner rather than later to make the biggest savings possible.
Take Out Insurance Policies
It is also paramount that you protect your company’s physical assets. This is where insurance policies come into play. There are various aspects of your business that you will want to insure. This means that if the worst is to happen and things get damaged, they will be replaced or you will be reimbursed the costs of the damage. You can take out policies for your commercial property (whether this is a store or office), your stock, equipment, company vehicles and smaller assets such as company phones. Remember, it’s always better to be safe than sorry, so if anything is worth any significant value, ensure that it is covered on your policy.
Invest in Employee Safety
Your employees’ health and safety in the workplace should be your top priority. Not only for the sake of their well-being but also to avoid being taken to court for negligence. Avoidable injuries or accidents in the workplace can see you fork out large amounts of compensation to the victim and you will also lose a productive worker while they recover. So, make essential changes to your workplace in order to prevent problems before they arise. Basic health and safety involve the safe storage of flammable goods such as spray paints, lubricants, cleaners, adhesives, and degreasers (click here for storage ideas) as well as having the proper signage for potential hazards. Signage could include wet floor signs (to be placed out while spills are cleaned up and allowed to dry), low ceiling signs and mind the step signs. If your staff members are working in an office environment, make sure that you invest in ergonomic furniture and equipment. This will prevent the risk of employees developing health issues such as repetitive strain injury.
Security
A huge cause of debt in companies is theft. Whether you have a retail store or offices, potential thieves are always on the lookout for an easy burglary job. So make sure that you have sufficient means to deter them. An initial step could be to install CCTV cameras both outside of your commercial property and inside. Next, install a security system that will raise the alarm if anyone enters the premises out of hours. The loud sound will send robbers fleeing before they have the chance to take much of your property and the system can also alert local law enforcement, allowing them to get to the scene as quickly as possible.
Reduce Expenses
If you find that you are struggling, it may be time to start reducing your business’ expenses. If you have excess staff members, it may be time to lay some off. This is always a situation that we want to avoid if possible, but you need to ensure that your team of staff create profit rather than loss, so only keep members who are working effectively and making sales, have high-quality customer service or are significantly contributing to improving your brand in another way. You can also reduce spending in other areas. Encourage staff to only print and use resources such as paper when necessary. Provide cheaper coffee or tea options in the staff room and request that staff members do not take stationary home for their own personal use. These aren’t unreasonable actions. You may be surprised, but these small steps can save you a small fortune in the long run and their reduction won’t generally have any negative effect on your business or its working environment.
By following these necessary steps, you can save your business from sinking into debt. Remember that prevention is better than cure and that it is easier to prevent your company from slipping into the red than trying to help it resurface once the damage is done.
