Operational costs are often a sticking point for small businesses that want to be prosperous but feel burdened with the weight of the everyday outgoings associated with mission-critical aspects of their operations.

Rather than settling for a state of affairs where you’re constantly teetering on the edge of financial viability, it’s better to take advantage of tech upgrades instead - both as a means of cutting costs in the long term and improving efficiency in the immediate future.

To show how this can be done, here are a few examples of gear that’s worth adopting to minimize expenses while maximizing output and maintaining the desired level of quality in what your company does for customers.

Modernizing Manufacturing

For small to medium-sized enterprises, the pathway to profitability often involves optimizing manufacturing processes. This is particularly relevant in industries where production efficiency directly correlates with cost savings. 

Integrating modern technology into your manufacturing lineup means you can significantly reduce manual labour costs, increase output, and maintain higher standards of quality control. 

Here’s how:

Automated Assembly Lines

Transitioning from manual assembly to automated lines can accelerate production times and reduce errors. This shift not only supports a faster turnaround but also enables employees to focus on more critical, less repetitive tasks.

For instance, if you run a small vape brand, adding a cutting edge cartridge filling machine to your equipment lineup will allow you to keep up with ever-growing demand. These machines precisely control dosage and minimize waste, thereby saving material costs and increasing production speed.

 Smart Manufacturing Systems

Implementing systems that use IoT (Internet of Things) devices can help monitor machine performance in real time. This facilitates proactive maintenance which can prevent costly downtime - with estimates pegging the potential reduction in unplanned outages at 50%.

Energy Efficient Technologies

Upgrading to energy-efficient machines helps reduce utility costs over time. Newer models often operate under lower power requirements without compromising on performance or output capacity. 

This is significant given that energy prices are still up significantly over the past couple of years, and a 30% spike in electricity usage shows changing trends are at play which will not slow down or reverse any time soon, meaning businesses must plan equipment procurement with efficiency in mind.

Streamlining Office Operations

When small businesses consider tech upgrades, often the focus is on production or service delivery mechanisms - yet enhancing office technology can dramatically improve productivity and reduce overhead costs. Simple changes in office environments can lead to significant improvements in how quickly and efficiently tasks are completed. Here are some considerations in this context:

Cloud-Based Solutions

Adopting cloud computing allows for seamless file sharing and communication among team members, regardless of their physical location. 

Services like Google Workspace or Microsoft 365 enable real-time collaboration that speeds up project completion rates and reduces time spent in meetings - and of course, you don’t need to worry about hosting any of the hardware on-site, or paying for the backend maintenance and upkeep.

Advanced Project Management Tools

Tools like Asana, Trello, and Monday.com help teams track progress without the need for constant check-ins or lengthy email threads. 

Given that there’s been a spike in the amount of time spent in meetings over the past half-century, with averages sitting at 23 hours a week, there’s a lot of productivity and value which can be clawed back by adopting solutions that quash this need.

Ergonomic Office Equipment

Investing in ergonomic chairs and desks can reduce workplace injuries and enhance employee comfort - leading directly to increased productivity. While fit-out costs for a typical office sit at between 10 and 25%, if this portion of your small business budget is spent wisely, it will be repaid many times over.

High-Speed Internet Connections

Upgrading to fiber-optic Internet ensures that your team doesn't waste time waiting for uploads or downloads, making data-intensive tasks more manageable. This goes double if you’re offering remote working opportunities to employees, and you expect them to be tapping into business resources from an off-site connection.

The Last Word

The final point to reiterate here is that while you will usually need to spend money to make these upgrades work, you shouldn’t only focus on the upfront costs, because the ROI associated with the latest tech is impressive, and it’s better to act to see significant returns later, rather than muddling by in a less-than-ideal set of circumstances indefinitely.

Securing financing for your small business is always a nail-biting and time-consuming process - one which is made all the more intense during periods when the future outlook isn’t all that rosy. As such it’s important to plan strategically, and make the most of tailored loan solutions to prevent economic ebbs and flows from upsetting your best-laid plans.

SBA loans are arguably the best option out there, so let’s look at what’s so special about them, and how you can secure one to provide stability to your operations while others around you are losing ground.

The Basics of SBA Loans

When your small business faces the unpredictable tides of a volatile economy, you need to get a grip on the intricacies of SBA loans. This knowledge will serve you well whatever comes over the horizon, as the Small Business Administration (SBA) offers various loan programs designed to support businesses, including:

• SBA 7(a) Loan Program: This is the most common, serving the needs of all sorts of established small businesses that need investment to grow and prosper, with amounts up to $5 million.
• CDC/504 Loan Program: This loan category is primarily used for major fixed asset purchases, topping out at $5.5 million for each project covered.
• Microloan Program: This program provides loans up to $50,000 - so it’s well suited to smaller operations or more compact yet no less critical projects.

Over 57,000 SBA-backed loans were given the green light by associated lenders in 2023, equating to $27.5 billion in total funding for small businesses. So there's a lot of cash out there to claim - it’s just a case of getting your foot in the door.

The Loan Application Checklist

Kicking off the SBA loan application process is not something you can do without being ready for rigorous preparations to be made. Here’s what you need to begin:

• Business Plan: A business plan will explain the overarching purpose of your organization, and in doing so form the basis of your explanation of how you’ll use the loan if approval is granted.
• Financial Records: Prepare balance sheets, P&L statements, tax returns, and cash flow projections to prove the claims you make about the financial status of your business.
• Collateral Documentation: While not always required, having assets to back your loan can enhance approval odds.
• Personal Information: Lenders will review the business owners' history, so be ready with personal financial statements and credit reports.

While tens of thousands of SBA loans may be approved each year, about 52% of the businesses that apply get turned down, which is why you can’t be half-hearted about your initial prep work. Aiming for meticulous attention to detail and having all the necessary documents at hand will work in your favour.

Maximizing Your SBA Loan Approval Odds

There’s a lot riding on your loan approval, and while we’ve touched on a couple of things that can tip the scales for your firm, there’s more to discuss. So, here are some steps to take:

• Strengthen Credit Scores: Both personal and business credit scores are used by lenders to calculate potential risks, so check up on these and take action if action is needed before applying.
• Boost Your Equity Contribution: A higher down payment can demonstrate your commitment to the loan, and reduce lender risk.
• Manage Debt Wisely: Displaying a history of prudent debt management makes a difference - and while it’s not a short-term fix, it’s an example of how sensible money management is always a priority for business leaders.
• Create Strong Relationships with Lenders: Trust is the currency of banking, so cultivate it with the companies who might one day be providing you with a business loan when times are tough.

If in doubt, you could work with a broker who deals in business loans, as they will have the knowledge and experience to not only up your chances of approval, but also advise you on other case-specific steps to take.

Wrapping Up

A well-chosen loan from an SBA-linked lender will not necessarily guarantee your business’s long-term viability, but it will see you through uncertain times, and provide the foundation for future prosperity - so use these steps and tips to your advantage, rather than leaving your future in the hands of fate.

When a small business finally enters the market, it has the difficult task of establishing itself amongst the major corporations that dominate the industry. It can be challenging for new business owners to find ways to differentiate themselves from their competitors. However, with some creativity and proper planning, there are ways to set yourself apart.

Whether you choose to increase your brand awareness through clever marketing campaigns, build a positive reputation with your local community, or stand out from the crowd with eye-catching and personalized product labels unique to your customers, implementing effective business strategies will allow you to gain a favourable edge over your closest competitors.

Personalise Your Services

Small businesses have the wonderfully unique ability to be more customer-centric compared to larger companies. Use this to your advantage by taking the time to understand the requirements of each customer via a consultative approach to deliver a flexible and personalized solution to meet their needs.

Small businesses have the opportunity to provide efficient, creative, and dynamic personalized services to their customers, which often allows you to build an emotional connection with them, securing their continued loyalty to your brand.

Increase Brand Awareness

Work closely with your marketing team or social media consultant to increase brand awareness across the platforms that best cater to your target audience. The more people know about your company and the value and quality of the products or services you offer, the more likely they are to become customers.

Don’t fall into the trap of strictly advertising to your chosen market. Try engaging with prospective customers by trialling new marketing strategies that could potentially allow you to appeal to a different target audience. However, ensure your main focus remains on a target market that is guaranteed to translate into actual sales.

Focus on Your Strength & Expertise

Many experienced entrepreneurs highlight the importance of focusing on how your expertise, experience, drive, and agility will enable you to do things that larger companies can’t, ultimately allowing you to gain a competitive edge over a more established business.

Engage in ADAP conversations, which give you the opportunity to focus on what matters to your audience and detail the different ways you can deliver goods or services in a uniquely effective way.

Identify Business Trends

An effective way of staying ahead of your competitors is by researching and implementing new and upcoming business strategies before they can. One of the most popular ways to gain an advantageous edge is through marketing channels.

Keeping up-to-date with the latest trends on social media platforms and other digital spaces allows you to embrace alternative marketing approaches that can set you apart from other companies and showcase your product or service to a brand-new market.

Start Local to Build Reputation

The biggest mistake you can make when launching a new small business is trying to do too much too quickly. Don’t be afraid of starting slowly and remaining local to build a favourable reputation and community.

By offering exceptional customer service, quality products, and a money-back guarantee policy, you illustrate your belief in your product. This helps your customer base trust your company and the products they hope to receive. They, in turn, will begin to market your business for you through word-of-mouth promotion and via their social media platforms.

Improve Your Quality

Finding ways to constantly improve the quality of your business is an important way to stay at the forefront of your chosen business market. Utilizing customer reviews and valuable feedback will give you a clear and honest idea of where your business may need improvement.

As your budget allows, consider introducing higher-quality materials to your product making and expanding your customer service team to better meet your customers' needs. By regularly assessing your company's overall quality and business practices, you will be able to mitigate and eliminate any potential problems before they become serious issues that could tarnish your reputation.

Establish a Positive Workplace Culture

It is important to articulate and showcase your business's purpose, vision, and core values to build appeal and credibility with potential customers and future employees. A key aspect to fully embracing this strategy to build a competitive edge is how a small business actively practices the culture and promises it claims.

By facilitating and building a creative, progressive, supportive, and healthy work environment, you motivate a workforce to perform their jobs to the best of their abilities and create a visual representation of the positive impact you want your brand to make.

Prioritise Networking

As a business owner, your network can be one of your greatest strengths. Maintaining a strong networking culture that constantly allows you to meet new people and establish new connections within the industry is an essential part of growing any business. After all, you never know what meeting one new person will lead to or what potential exposure and valuable business connections it could carry.

Create Meaningful Content

Create meaningful and memorable content that shows your current and potential customers the value your business can offer them. This can be done through a podcast, vlog, a published article, or through a social media campaign that allows you to build credibility, trust, and authority within your industry.

Provide exceptional customer service to your current clients and encourage them to share your business with friends and family. 

But you may not have heard the challenges of taking a business from the first day to becoming self-sustaining.

According to government statistics, 20% of all new businesses fail within the first year and almost half within five years. 

The difference between the survival and failure of a business depends on how prepared the stages of business growth an investor is, which starts with understanding the stages before you start your business. This guide explores five stages of business growth in 2023.

#1 - Existence Stage

The existence stage is the beginning of a small business's journey. At this stage, an entrepreneur actualizes what was previously an idea by starting an actual business. The business merely exists, and it's more of trying out the business idea's viability, and formal planning is almost non-existent. 

More often than not, the business owner runs almost every aspect of the business. At this stage, entrepreneurs encounter difficulty getting customer acceptance and limited finances. 

To survive this stage, entrepreneurs must learn about available financing options to stay afloat while investing more in product and service improvement to earn customer trust. 

#2 - Survival Stage

If you have succeeded in creating a substantial customer base and not generating some revenue, your business is now in the survival stage. Making it to the survival stage is quite an accomplishment, but it doesn't get the business out of the woods yet. 

You already know your idea is viable by now, so you'll be looking at its survival. At this stage, the focus should be on making consistent profits and putting systems in place for scaling. Your need for human resources will increase, but before you take in new hires, it is best to leverage technologies to enhance the efficiency of the available resources. 

For example, if you are in the brewery industry, you can use Ollie or similar software solutions rather than increase your workforce. Investing in the right tools helps you streamline inventory control for your brewery, get the most out of the existing workforce, cut your overhead cost and record more profits. 

#3 - Success Stage

Also known as the maturity phase, the success stage is the phase where the business can be said to be making significant profits in thriving. Most entrepreneurs consider bringing experts such as sales executives and other departmental leaders at this stage. With expansion control, the entrepreneur can finally relinquish some important roles of running a business they had held from the existence stage. 

At this stage, the investor doesn't have to keep worrying about surviving, not to mean that failure is out of the question. Instead, the focus is on continuing the trend of success and making even more profit.  

Also, it's at this point where as an entrepreneur, you can talk about having your money work for you, unlike other stages where you have to work for your money. 

#4 - Take Off Stage

After months in the success stage, most businesses will enter the take-off stage. At this stage, companies experience exponential growth, which is the reward for spending time building your business. 

The main concern in the take-off stage is the expansion and how to fund that expansion. 

Different organizations and businesses will choose different paths for expansion. For some, it will be merging and buying into companies. Others may be looking at developing new products or moving into new markets. 

#5 - Maturity Stage

The maturity stage is the stage at which a business can be said to have achieved the highest level of success. The highest level of success can mean different things to two different entrepreneurs or organizations. But as a general rule, a business has matured if it is an industry leader. 

Also, the business must have almost exhausted all growth opportunities in its current market. The greatest challenge for businesses at this stage is stagnation and decline. Applicable strategies to counter these challenges include exploring new markets and focusing on innovation and the development of new products.

If you’re finding it hard to factor VAT charges into your finances, then this article can help you to understand exactly when you need to start paying VAT, how much VAT you might have to pay, and why VAT return software is an essential part of the process.

What Is VAT?

VAT, or Value Added Tax, is a type of tax that’s charged on many goods and services. You’re probably already used to seeing VAT charges on invoices when you place orders online, usually as part of the breakdown of your order total alongside shipping costs. Most businesses include VAT in the price displayed on their website, but an invoice gives you extra insight into how much of that cost is actually VAT.

VAT Rates Explained

VAT rates can vary depending on the product or service you’re selling, as well as how it’s being sold, so it’s important to calculate VAT on a case-by-case basis if you’re selling lots of different products. Here is a brief overview of VAT rates and the categories they apply to:

•       Standard 20% Rate: The majority of goods and services will be taxed at the standard 20% rate, so there’s a good chance at least some of your business’s wares will fall into this category. Even if you think some of your goods are zero-rated after reading this list, such as food and drink, pay close attention to the conditions surrounding the sale of these products. For example, alcoholic drinks and food that’s sold hot are still subject to the standard rate of VAT.
•       Reduced 5% Rate: Some goods will be taxed at a reduced rate, which is usually 5%. VAT is typically reduced on central heating repair services, nicotine patches and energy-efficient materials that can be used to build or improve homes.
•       Zero-Rated: Businesses don’t pay any VAT on zero-rated goods, which include children’s clothes, books, newspapers and food for human consumption (with exceptions).
•       Exempt: Similarly to zero-rated goods, exempt goods don’t incur VAT charges. However, if your business sells exempt goods exclusively, you won’t have to register for VAT. Businesses selling zero-rated goods may still need to register. Common exempt services include online gaming, sports activities and funerals.

Who Pays VAT?

Only businesses with an annual turnover of more than £85,000 have to register for and pay VAT. Businesses below this threshold can register to pay VAT voluntarily, but there’s no obligation to do so, even if they sell goods taxed at a standard or reduced rate.

Registering For VAT Voluntarily

Deciding whether you want to register for VAT early will depend on your business’s needs and whether the additional admin and paperwork are worth the rewards you may reap.

VAT registration can be a bonus for some businesses because while you will have to pay VAT to HMRC, you will also be able to claim it back on any eligible purchases. If you regularly buy a large number of business supplies from VAT-registered businesses, claiming back the VAT could save your business money.

However, claiming back VAT makes your bookkeeping process more complicated and you may need to seek assistance from an accountant. You will also have to consider whether your customer base will be happy to accept higher prices, especially if your goods and services are taxed at 20%.

How To Register For And Pay VAT

Before paying any VAT, you will have to register your business for VAT online. You’ll usually receive your registration number and certificate in around two weeks and won’t be able to charge your customers VAT until then. However, it’s a good idea to increase your prices to account for the extra charges while you wait. This is because you’ll be liable to pay VAT from the day your application is sent off, so make sure you keep careful records of invoices and receipts as soon as you start the registration process.

VAT Software

As of April 2022, all VAT-registered businesses must use accredited accounting software to file their tax returns. This is because of a new policy called Making Tax Digital, or MTD, which aims to make filing your VAT return a much smoother process. Not only will your software automate your VAT calculations, but it will also help you to keep careful records of invoices and expenses while staying up-to-date with any tax law changes and deadlines so you don’t have to.

Keeping Records For VAT

While it’s important for all businesses to record their income and outgoings, VAT-registered companies need to be extra vigilant. It’s important to keep your business transactions separate from your personal spending, which is why many entrepreneurs open separate bank accounts. Some of the records you will need to have for VAT purposes include:

•       A list of every product you’ve bought or sold, regardless of the rate it’s taxed at
•       Copies of every invoice you receive or issue to customers
•       Self-billing agreements and the personal details of the clients these apply to (such as names, addresses and VAT registration numbers)
•       Debit and credit notes
•       Bank statements, paying-in slips and cheque stubs
•       Any products you’ve claimed for personal use, given away, or lost
•       The total amount of VAT you’ve charged (on products you sell) and paid (on products you buy)

It’s important to keep VAT records for six years, as HMRC could request to see them as part of an investigation.

Manage Your VAT More Effectively

Once you’ve decided whether VAT registration is necessary for your business, you can begin implementing processes that make managing your tax return a smoother process. This should include finding an accredited accounting software provider and gathering your financial records but could also involve hiring an accountant or advisor to assist in maintaining your books.

1. Look Into Taking Out A Business Loan

One of the fastest and most convenient ways to get some extra cash is to take out a small business loan. A small business loan is used to finance anything your business may need. You can also use it as an added security blanket. Furthermore, depending on your lender, you may also be eligible for a few benefits. These benefits can include coaching for new business owners, resources to enhance your knowledge, and connecting to a professional support network. Keep in mind that not every lender has these benefits. You'll have to ask for more details when you apply.

2. Try Out Bootstrapping

Bootstrapping is a business term that's used to describe an owner who uses their own personal funds to finance their business. You might think it is somewhat counterintuitive as the goal here is to procure extra funds and save more. However, this doesn't necessarily mean using almost every cent you have for it. Bootstrapping also means using any spare personal funds. If you have any extra money lying around, putting it towards your business isn't a bad idea.

3. Host A Crowdfunding Event

Crowdfunding used to be considered a non-traditional way to finance startups but is now something that's seen a lot of popularity as the years have gone by. It's where people procure small donations from a large group of people to use for their intended projects and ventures. Not only is it a great way to obtain the money you need, but it's also how you advertise yourself. People, namely your target audience, want to see everything you have to offer. Crowdfunding offers you a fantastic opportunity to showcase what you have planned. Just remember to be as transparent as possible. It helps build trust between you and your audience. If you're lucky, you'll catch the eye of an angel investor. An angel investor is an individual who donates an average amount of $25,000 to a cause they believe in. In rare cases, they can donate as much as $100,000.

4. Ask Your Friends And Family

Another way you can get some extra money for your business is to ask your friends and loved ones. However, it's not as simple as asking them and they just give you what you need. For them, this is a type of investment. They will need to know what their money is going towards. As with crowdfunding, be as transparent with your friends and family members, so they have the information they need to invest.

[ymal]

The importance of accounting

The reason accounting is important, it is a pivotal aspect of the business that essentially allows it to function. It does this by keeping tabs on the influx of money coming in and out of the business. Tracking income and expenses, and verifying compliance while providing all parties involved with the necessary information to make the correct business decisions.

What type of accounting do new businesses use?

Generally, small businesses can use either cash or accrual accounting methods. A small business accountant is responsible for recording, analysing and reporting the business's financial transactions. The numbers which are collected are converted into an understandable statement for the business owner to decipher.

Tips for choosing an accountant

Working with reliable individuals is paramount to the success of your new business, this is why you need to do the required research to find the perfect fit for you. The following tips should help you find the right accountant. 

1. Make sure you know what you need

When handpicking your accountant, you will have to identify what type of tasks and responsibilities you expect the accountant to perform for your business. Whether that entails bookkeeping tasks, or if you require monthly financial statements to be completed, a bookkeeper can be recruited rather than a start-up accountant.

If you require advice regarding your tax, preparing tax returns, and auditing financials, you will need a certified public accountant (CPA).

2. Look for small business experience

When in search of financial expertise for your new business, steer clear of the big accounting firms, because you will need an accountant which has experience with working with new businesses preferably in the same or similar industry.

The knowledge and expertise they have gathered will be important in helping your business avoid possible mistakes and mishaps they have come across in the past, being proactive and identifying issues before they escalate into larger problems. These decisions essentially fast track the growth of your business by making the right financial decisions.

3. Ask for recommendations

When purchasing a product, consumers often seek out product reviews to get an understanding of the performance of that particular product. Speaking to other trusted business owners and receiving recommendations about who to approach and use, your peers will always give your trustworthy advice as well as recommendations.

4. Compare fees

Before making a decision it is important to make sure how your shortlisted accountant plans to bill you.  Different accountants charge different rates, whether it be a fixed monthly fee to complete all your bookkeeping, but may add an additional fee for completing and submitting compliance documents. The fee for each service varies based on what services are provided and the qualifications of the person providing the services. Not all accountants and accounting firms charge the same fee for their services.

The three most important things your accountant should do

Along with having numeric skills, being computer literate and having business awareness, your accountant will need to complete important tasks for your business. Maintaining major financial reports. Preparing taxes and monitoring payments. Analysing the operations of an organisation’s finances and recommending best practices, identifying problems, and strategising solutions.

Importance of learning and understanding accounting as a business owner

Having an understanding of accounting and being aware of what needs to be done eliminates the risk of your accountant falling behind on their work. Being able to hold them accountable helps maintain their performance. As a new business, the managers are now also able to make future projections and do so by making predictions using accounting practices. In addition to being necessary for a business's immediate financial health, being familiar with accounting is also an important strategic tool to utilise and understand to grow your business.

Conclusion

While not being a straightforward recruitment process, with the help of the tips your search will be simplified if you follow the steps provided.

As stated, accountants play an integral role in your business's success and growth, with the right accountant the sky's the limit. Placing all the responsibility on the accountant though will not ensure your success, you will be required to bring your end of the bargain by providing a suitable environment for your business to succeed.

Not all entrepreneurs are good with numbers and keeping records, which is why it’s so crucial that they have a solid plan in place for money matters. Whether you’re thinking of starting a small business or want to improve the way you handle your books, these tips can help you to achieve more control over your financial situation.

Accounting Software

If you’re still using spreadsheets to keep track of your finances, it might be time to invest in accounting software. This will help you to keep all your records secure while maintaining accurate information. There’s less room for human error thanks to the software’s ability to make calculations for you and you’ll never misplace an invoice or receipt again. What’s more, many types of accounting software will also help you to handle payroll and have better visibility over your cash flow.

Invest Your Money

When starting out it can be tempting to hold onto your money tightly, but this can often do your business more harm than good. While you need to be making a profit, it’s important that you reinvest your money in your business. This is crucial for future growth and will help you to increase your profits in the long term. Whether you’re thinking of hiring a marketing agency, upgrading your website or building an app, take some time to improve the services you’re offering to your customers to see your revenue increase.

Be Aware Of Tax

Everyone knows they have to pay tax, but are you planning for it throughout the year? Many business owners only start thinking about tax as their deadline approaches, but this can put you in a tricky financial situation if your payment is bigger than you expected. Make sure you’re calculating tax as you go and setting aside funds that you know aren’t really yours. This way you can avoid any disasters at the end of the tax year that could potentially see your business folding before it’s even had a chance to grow.

Choose Loans Carefully

People have different attitudes to loans, with some refusing them completely and others taking out too many. Loans aren’t all bad but you do have to choose them carefully. If you need an injection of cash to get your business off the ground, a loan could be well worth your time. But taking out loans with high interest rates could hurt you in the long run, especially if you’re not investing the money as wisely as you should.

Insurance

Finally, insurance might be an extra expense in the short term, but it can save you thousands further down the line. Make sure you thoroughly research the types of insurance your business can benefit from to give yourself complete coverage. You want to be fully protected from potential lawsuits as well as natural disasters like floods and fires. 

Cash flow, the money a business has in the tank to function, can make or break businesses. The latest MarketInvoice Business Insights explored the attitudes of UK SME owners on managing cash flow.

What is cash flow?

Put simply, cash flow is the money your business has readily available to use for day-to-day operations. Put less simply, it is whether your current assets are enough to cover current liabilities. Cash flow is also sometimes referred to as operating liquidity, working capital and current ratio.

Over half (52%) of business owners said they relied on making ad-hoc paper notes, using spreadsheets or relying on text messages from their bank to understand their cash flow position. Meanwhile, 18% reported using online accounting software to do so. Overall, 70% are taking it upon themselves to manage this. Only 30% were using an accountant to manage cash flow information.

Cash flow is clearly something front-of-mind for SMEs with almost half (45%) of business owners checking their cash flow position on a daily or weekly basis to ensure they have the means to continue the smooth running of their business.

Anil Stocker, CEO at MarketInvoice, commented: “Every business needs to know their cash flow position but the disproportionate manual focus on this can distract entrepreneurs from focussing on their business and driving growth. Managing cash flow needn’t be such a taxing affair with the plethora of online tools available today.”

Cash flow constraints mean that 87% of businesses are prevented from taking on more orders. Yet, two-thirds (67%) of business owners aren’t seeking any advice about cash flow. Of the businesses that ask for help, the majority (14%) are turning to their business bank manager. Furthermore, in shoring up cash flow, almost half (48%) of business owners reported increasing their bank overdraft facilities and one in six (16%) used invoice finance to tackle cash flow constraints.

Anil Stocker added: “It’s imperative that business owners get advice to manage their cash flow. We can’t allow UK economic growth to be stunted because of cash flow constraints. Businesses waiting on long payment terms can use invoice finance to help bridge the gap by getting an advance on their invoices and propel their businesses forward.”

For many small enterprises an injection of cash is required at some point - either at the start-up stage, in preparation for growth, or simply to stay in the game.

However, many small business owners set out with blind optimism and underestimate the level of funds required to keep a business afloat. Oliver Spevack, Chartered Accountant and co-founder of OS Accounting specialises in supporting start-ups and SMES.

He says: “Poor financial planning can cripple a small business and lack of funds is one of the common reasons why new businesses run into problems and fail.

“So many small businesses that come to us have no business plan and no idea how to raise capital. They are completely unaware of the grants and tax relief schemes available to them.”

Funding can make or break a small business. Let’s take a look at the options available.

Family and friends

The cheapest way to borrow money is by getting an interest-free loan from family or friends. You may be able to negotiate a longer-term payment plan than you would get with a traditional loan through a bank, or agree to pay the money back in a lump sum once your company reaches a certain profit or turnover target. You probably won’t have to give a share of your business away either.

Social media crowdfunding

Crowdfunding has become an increasingly popular option for funding a small business in recent years. It does, however, require a strong promotional strategy, increased transparency, and the possibility of giving up a stake in your business. See more on the different types of crowdfunding and the best crowdfunding sites to launch on here.

Business loans

A wide range of lenders offer loans to small businesses, from traditional banks to online specialists. Small business loans are also available from the government. The British Business Bank (the government’s publicly owned development bank) was set up to help small businesses in the UK access funding. The bank offers start-up loans from between £500 to £25,000 and helps small enterprises understand and access funding options.

See some frequently asked questions on small business loans here.

Angel investors

Not a suitable option for businesses that want to retain 100 per cent control over their business, but angel investors do offer funding opportunities and can often bring some expertise to small businesses.

Essentially, an angel investor is a person, or group of people, who provide funding in exchange for a part of the business. They can be silent (i.e. just provide a capital injection) or can be active and offer advice and expertise to help grow the business.

BBC2’s Dragons’ Den has become the template for what happens when a small business needs investment from an angel investor.

Read more on the pros and cons of angel investors here.

[ymal]

Venture capitalists

Venture capital is similar in its concept to an angel investment – there are, however, differences. Essentially both offer funding in exchange for a share of the business. The main difference is that angel investors work on their own, whereas venture capitalists are a division of an organisation or an organisation in their own right.

Venture capitalists are only interested in businesses that are likely to make a high return. They look for small businesses that have the potential to grow into large companies.

Research and development grants

Small business grants are one of the best sources of funding available to start-ups, developing and established small businesses. There are many private and government schemes available. The qualifying criteria varies hugely, but there are literally hundreds of schemes from Princes Trust Grants to global investor, Unltd Social Enterprise Funding.

Many of the grant schemes available to small businesses are industry or location-related, such as the Energy Entrepreneurs Fund which supports the advancement of energy technology or council-run business development grants, which may also have industry-related criteria.

Tax relief schemes

Not strictly funding, but tax relief schemes are another underused resource that can provide a considerable boost to a small business’s funding pot. The tax breaks commonly overlooked by small businesses include:

• Research and development (R&D) tax credits
• The Annual Investment Allowance (AIA)
• The Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS)
• Enhanced Capital Allowance (ECA)
• The Employment Allowance

Let’s take a brief look at each of these.

R&D Tax Credits – a government scheme designed to reward and encourage greater innovation across the UK business sector, which can amount to tens, even hundreds of thousands of pounds, every year. See more about the government scheme here.

Annual Investment Allowance – a government scheme offering tax relief to British businesses on qualifying capital expenditure, specifically on the purchase of business equipment.

EIS and SEIS – these are government backed investment schemes that encourage investment in small and medium-sized companies.

Enhanced Capital Allowance – the government ECA scheme was introduced in 2001 to encourage businesses to invest in energy-saving equipment. Businesses can claim 100%  first year tax relief on qualifying equipment.

Employment Allowance - The government’s EA scheme was introduced in April 2014 to incentivise recruitment in smaller businesses - this is worth up to £3,000 per year to set against an employer’s Class 1 NIC bill. Single director companies without employees do not qualify.

What is the enterprise investment scheme and could it be useful to you and your business? Below Tony Stott, Chief Executive of Midven, has the answers.

The Enterprise Investment Scheme, we believe, is one of the investment sector’s best-kept secrets. Despite helping 26,000 privately-owned small businesses to access £16bn worth of funding for growth over the past 25 years, and securing attractive tax-efficient returns for investors in the process, the scheme has a relatively low profile.

That is now changing, however, as savers seek out new opportunities to plan for their long-term financial needs in the face of increasing restrictions elsewhere.

Most obviously, the once-generous rules on contributions to private pension plans have been steadily curtailed. Today, most investors are limited to annual pension contributions of no more than £40,000; moreover, higher earners, with annual incomes of more than £150,000, get a smaller allowance – as little as £10,000 a year for those with incomes of more than £210,000. The lifetime allowance, which levies tax charges on pension funds worth more than £1.03m, is also a problem for increasing numbers of people.

By contrast, the EIS offers much more generous allowances, with investors able to put up to £1m a year into qualifying companies. For many savers, the scheme therefore represents an increasingly valuable opportunity as a complement to pension saving, particularly as it may also be a more flexible option. Investors must hold on to their EIS shares for only three years to retain their tax incentives; pensions, by contrast, can’t be accessed until age 55 at the earliest.

[ymal]

Those tax incentives are certainly alluring, spread across income tax, capital gains tax and inheritance tax:

• investors receive 30 per cent income tax relief when they make an EIS investment, reducing the cost of a £10,000 investment to just £7,000;
• profits are also tax-free, even where they exceed an investors’ annual capital gains tax allowance. The scheme also enables investors to defer paying tax on previous capital gains if they reinvest the profits on which the bill is due. Losses, meanwhile, can be set against tax;
• EIS shares are exempt from inheritance tax. Once they have been held for 2 years.

Understanding the investment opportunity

It’s important, however, not to let the tax tail wag the investment dog. After all, tax reliefs aren’t much use to investors who end up losing their starting investment.

It’s only fair to point out that the Government offers these tax breaks partly because it recognises the high risk of EIS qualifying companies, due to their illiquid nature. To be eligible for the scheme, companies must meet some restrictive tests: amongst other criteria, they must have assets of no more than £15m, fewer than 250 employees and be less than seven years’ old. These small, early-stage businesses are, by their nature, more likely to fail than larger more established companies.

That said, the best of these privately-owned companies also tend to deliver much more exciting returns than their larger counterparts trading on recognised stock exchanges. And investors can mitigate the risks of EIS investment through diversification. While would-be EIS investors do have the option of investing in individual companies with EIS-qualifying status – including many businesses on equity crowdfunding platforms – it is also possible to get exposure through a managed fund of such businesses run by a specialist asset manager. Such vehicles represent a potential way to spread your bets.

There are no sure things in investment, but the tax breaks on the EIS, allied with the opportunity to build a portfolio of shares in potentially high-growth companies, are an tempting mix for long-term savers. They are likely to be particularly attractive to those who are running out of pension allowance.

Indeed, the secret appears to be getting out there, with official figures suggesting EIS popularity has surged in recent years.

Figures from HM Revenue & Customs reveal that in the 2016-17 financial year, the most recent period for which data is available, some 3,470 companies raised a total of £1.8bn of funds under the EIS, though this was an initial estimate that HMRC expects to increase. In 2015-16, 3,545 companies raised £1.9bn of funds.

This won’t be a scheme for everyone. Investors will need to be prepared to accept the risk of partial or total losses, significant volatility over the short term, and to be patient. But for investors seeking out new opportunities to maximise the financial provision they are making for the long term, then EIS may be worth considering with your independent financial, legal and tax advisor.

The rapidly expanding tech startups industry is progressively becoming the future and face of the business world and those who want to nurture their inner Elon Musk are increasingly travelling abroad to emerging tech hubs. Although, Silicon Valley still remains the undisputed destination for startups and venture capitalists, a new crop of global tech hubs are rapidly expanding to match the talent oozing out of the Bay Area.

A recent study by SmallBusinessPrices.co.uk has revealed the best rising tech hubs for people who are seeking entrepreneurial opportunities. The research took into account the average internet speed, the average business valuation, and cost of living, among other metrics.

1. Boulder, US - With the second highest internet speed, Boulder has over 5,000 business investors and an average business valuation coming in at $4.3 million. Boulder is a prime location for those wanting to start their next tech-startup.

2. Bangalore, India - In spite of an average internet speed of 11mbps, Bangalore has over 6,000 investors and an average business value of $3.4 million making it one of the best locations on the Asian continent.

3. Johannesburg, South Africa - As one of the most affordable tech hubs for young innovators, Johannesburg boasts reasonable average monthly rent cost of $416. The city has an average business valuation of $3.6 million and over 1,200 investors.

4. Santiago, Chile - With 1,201 startups, Santiago is considered as a new home for tech startup companies, making it a great destination for those in the South American continent. The city has an average monthly rent cost of $372, making it the second cheapest city to live behind Colombo in Sri Lanka.

5. Stockholm, Sweden - Named the 9th happiest country in the world, Stockholm is the capital of Sweden and ranks number 5 for the World's Rising Tech Hubs. The city also scores highly for its internet connectivity with the second highest average internet speed of 42mbps behind Houston, Texas.

Digital Hotspots
Connectivity is a non-negotiable in the 21st century working world, especially for tech startups. Although Houston has only having 322 public wifi hotspots, the city number one for the highest average internet speed of 65 mbps. Stockholm offers some of the highest internet speed outside of the United States at 37 mbps.

Business
Recently, there has been growing trends of millenials moving abroad for greater work opportunities. Bangalore is great for young innovators as it call home to over 7,500 startups and the largest amount of investors (6,236). While Boulder in Colorado has the highest average business valuation of $3.4 million.

Living

The cost of living is one of the biggest concerns for many young people especially when the majority of their capital is being used to fund their venture. Helsinki has the highest average monthly rent cost of $1,548, with Tel-Aviv ($1,338), and Boulder ($1,250) respectively. Whereas Lagos has the lowest infrastructure score of 2.4, with the highest being Stockholm (4.27).

Although many still regard cities such as Silicon Valley as one of the few locations where entrepreneurs can develop their untapped entrepreneurial talent. This new study gives insight to the best alternatives rising cities to live and work for innovators outside the overcrowded Bay Area.