Like the gas in your car, cash in your business account keeps things running smoothly. But, if your tank goes empty, neither your car nor your business will be going anywhere until the fuel is replenished. A big business relies on its credit line from traditional lenders to keep the vehicle moving, but what if your business is a small …
Most business failures can be laid at the door of undercapitalisation. A business needs to have funding for business premises, equipment or inventory, if not both, plus staff wages, utility payments and a thousand other things that require cash outlay before a business turns a profit and can become self-funding.
You’ve started a small business, and it’s going well. At least, you think it is. You look at your Accounts Receivable and see that you have a couple of payments outstanding. You look at your Accounts Payable and see that there are bills coming up. Wait, have you made a profit or not?
Who needs to create a profit and loss account? Limited Liability Companies must produce a formal profit and loss account every year and submit it to calculate the amount of corporation tax the company needs to pay. If you’re a sole trader or partnership, you don’t need to create a profit and loss account for tax purposes but it’s useful …