Financial Advice for Business Owners

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Updated 01/09/2023

Every day you have to make decisions as a business owner.

That’s why it helps to receive financial advice which supports your decision-making.

In this article, we discuss financial advice for business owners. You’ll discover how to save money, look after your people and protect your business.

How to Save Money with Salary Sacrifice

Salary sacrifice is a simple way to cut your costs.

This HMRC-approved scheme, lets your employees exchange part of their salary for pension contributions. As a result, your business pays lower Employer’s National Insurance Contributions.

What’s more salary sacrifice is also a tax-efficient way for your staff to save for their pension. That’s because your employees will pay less tax and National Insurance on the salary they’ve exchanged for pension contributions.

For example, if you have 25 employees who earn £30,000, your business could save over £4,000 every year.

The more employees you have who take part in the scheme, the greater the savings for the company. So with 150 employees, your annual saving grows to over £24,500.

As an employer, you have to provide a pension for your staff and make contributions. However, a salary sacrifice scheme helps you save your business money and benefits your employees too.

How to Create a Financial Business Continuity Plan

The future is uncertain.

So it’s essential to plan how your business would cope with incidents and disruptions.

A financial business continuity plan helps you protect your business, your staff and business partners. That’s because your people and your shareholders are central to the long-term financial security of your business.

With the right kinds of insurance though, you can shield your business from the impact of unexpected events.

Protect Your Profits with Key Person Insurance

Every business relies on certain people.

Like the director who wins new clients. Or the manager who runs the business operations.

If you lose a key member of your team, the financial impact can be significant. This could mean customers losing confidence in the business, banks calling in loans or suppliers asking for payment upfront.

That’s why key person insurance is so important. It helps you to keep the business going and fund a replacement should the worst happen.

However, many business owners only think about insuring their premises, plant or equipment. Even though it’s much harder to replace an essential member of your team or business.

Key people can be owners, directors, sole traders or staff members. Depending upon your business, these could also be sales managers, R&D staff or technical experts.

There are different ways to calculate the level of cover for key person insurance. Speak to your financial advisor to confirm which is most appropriate for your business.

Losing one of your key people could have a major impact on your business. So plan ahead with insurance to protect your profits.

Safeguard Your Business When A Shareholder Dies

The loss of a loved one is a difficult time.

When the deceased is also a shareholder, it’s tough for their business too. As it means uncertainty when you least need it. That’s because it raises the question:

What happens to the shares of a deceased shareholder?

The answer is that it depends on what plans were in place before their death. A common situation is that the deceased’s family inherits their share of the business. So they will decide the future of the shares – whether to sell them or hold onto them.

However, this could mean that the shares are brought by a third party. Or the deceased shareholder’s family have to take part in company decisions.

A shareholder protection plan can help avoid uncertainty.

This insurance plan pays the other shareholders a lump sum when a shareholder dies. So they can buy the deceased owner’s share of the business.

As a result, your company stays in the hands of the existing owners. The deceased’s relatives are free from business responsibilities. You also have peace of mind about the future of your company.

Now’s the time to decide how to handle this situation in the best interests of your business and yourselves. A shareholder protection plan gives you the chance to protect the future of your business.

How to Make Tax-Efficient Pension Contributions from Your Company

You’ve got a choice when saving for your pension.

As a director, you can make personal or company pension contributions.

However, personal pension contributions are less tax efficient. That’s because you can only make personal contributions up to the value of 100% of your relevant earnings. This includes employment and other types of income, but it does not include dividends.

So this limits the size of your personal contributions to the level of your salary.

What’s more, if you increase your salary to make higher contributions you would have to pay income tax and National Increase on the higher salary. Also, your company would have to pay employer’s National Insurance on this too.

What’s the difference between company and personal pension contributions?

Pension contributions from your company are allowable business expenses. So they reduce your company’s liability for Corporation Tax.

What’s more, the relevant earnings threshold does not apply to company contributions. This means you can make pension contributions directly from your company which are more than your relevant earnings. The income you take from your company, in salary and dividends, is not affected.

These can have many tax advantages over personal contributions. However, always check that the payments you make are in line with the HMRC’s rules.

In short, when you make company pension contributions, you can still pay yourself a tax-efficient income with most of it taken as dividends.

How to Improve Your Employees’ Financial Wellbeing

There’s more to your employee’s financial wellbeing than their salary. Financial education is also key.

Changes to your workplace pension scheme or other benefits will clearly impact on your employees. However, the way you explain these changes will also affect your employees’ wellbeing.

What’s more, you want your staff to be well-informed and engaged when they have choices to make. For example, if you set up a salary sacrifice scheme each employee has to choose whether to opt in to the scheme.

A practical way to do this is with a series of employee seminars. These give your staff the chance to ask questions and have a conversation. Whether the seminars are face-to-face meetings or online webinars.

To make the seminars a success for you and your staff, ensure you’ve got experts in the room to answer people’s questions and address any concerns. That’s why it can help to work with a financial advisor to plan and run these workshops.

A financial advisor can explain the changes, answer questions and support people who need a personal review.

Financial Planning for Your Business 

You want to make the best financial decisions for your business and your employees. Our team of financial business experts are here to help you with practical financial advice for business owners.

Contact us for a financial planning business review with one of our advisors. Give us a call on 0345 224 3175 or book an appointment.

FAQs (Frequently Asked Questions)

How can I improve my business’s cash flow?

To enhance your cash flow, consider negotiating better payment terms with suppliers, reducing unnecessary expenses, and implementing efficient invoicing and collection processes.

What’s the importance of retirement planning for business owners?

Retirement planning ensures financial security after exiting your business. It allows you to maintain your lifestyle and provides for your future needs.

How can I attract investors for business expansion?

To attract investors, create a compelling business plan, demonstrate your business’s growth potential, and seek professional guidance from financial advisors.

What insurance policies are essential for my business?

Key insurance policies include general liability, property insurance, and workers’ compensation. The specific policies you need depend on your industry and business size.

How do I handle financial crises in my business?

During a financial crisis, focus on cost-cutting measures, negotiate with creditors, and seek expert advice to navigate the challenges successfully.

What sustainable finance practices can benefit my business?

Sustainable finance practices, such as reducing waste, minimising carbon footprint, and supporting ethical suppliers, can enhance your brand’s reputation and attract environmentally-conscious customers.

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