Stop Looking at Your Bank Balance: The Financial Mistake Costing SMEs Thousands

Yeah, I think it's a really common idea that the cash that we collect from clients in VAT and the corporation tax is our money.

But it was never really our money in the first place.

We're just tax collectors for the government, basically.

And so the number of times I've been in meetings with business owners who have said, it's OK, we've got 100 grand in cash and we don't owe that to HMRC until September.

And I'm like, hold on a second, that's not your cash.

So if you spend that now, or you use it to support your operations, you're going to have to find that again by September.

So I think a good practice for any business owner really is as soon as you collect that money, the VAT and the corporation tax, you put it aside immediately.

You can have one account for corporation tax and one account for VAT.

And I think that can save a lot of headaches for a lot of business owners.

It's very tempting to just take it and use it to fund your marketing campaign or whatever.

It's a very slippery slope once you start doing that.

It really, really is.

And I said exactly the same.

I do have separate accounts from my business that I've got.

And we valued up sort of what our quarterly BAT return would likely to be.

And we literally review it every month and we check it on our account system.

Okay.

And are we on track or not? And we put aside every single week what it's going to be.

And 99% of the time when we get to when it's due, we've actually put away too much.

That's a good headache to have.

Yeah, isn't it? So I mean, yeah, so when our bookkeeper says, okay, here's your VAT return for the quarter, we're like, oh, okay, the 10 grand or whatever, you know, comes back to us.

So it's a really good practice to put, I for one can confirm that it's a really good practice.

So that's spot on that

you've got it.

It's so tempting because you look at the outstanding invoices and you've got, say, 120 grand of outstanding invoices yeah but only 100 of that is your revenue the additional 20 is the VAT but the amount of the invoice is 120 and the amount that's going to land in your bank account is 120