Essential Top 10 Financial Tips for UK Business Owners

Business ownership entails investing a great deal of your time, efforts and money into your company. Effective financial planning is vital to ensure not only your company’s but also your own financial future. These 10 financial tips for UK business owners are designed to help you protect and secure your business’ and your family’s financial future.

Financial Tips for UK Business Owners

Our financial tips for UK business owners can be broadly divided into two sections: planning for and protecting your company’s future and planning for and protecting your personal future.

1. Planning for and Protecting Your Company’s Financial Future

1.1 Set & Balance Your Goals

The first, and without doubt most important, step of effective financial planning is to establish your long and short term financial goals. Business goals frequently clash and interfere with personal goals. Purchasing new equipment/premises, plans to expand into new markets, etc. could, for example, affect your ability to save for retirement or fund your children’s college/university education. Prioritising business goals over personal goals or vice versa could have a detrimental impact on achieving either of them. Striking the perfect balance between your personal and business goals is the key to achieving both.

1.2 Get a Great Accountant

Keeping on top of your finances, preparing your accounts for annual taxes, etc. requires a huge amount of skill and time. Investing in a good, reliable accountant you can trust ensures this side of your business is dealt with by competent, highly trained and knowledgeable individuals – while giving you the time to get on with running your company.

1.3 Get Key Person Insurance

While all employees are naturally important to your company, some may play a major role in your business’ success. This could, for instance, be an especially important member of your product development team or a particularly effective marketing representative. Losing such an individual through critical illness or death could have a significant detrimental impact on your company’s profitability. We therefore highly recommend taking out key person insurance on such individuals. Designed to pay out a lump sum upon the critical illness diagnosis or death of a key individual, such a policy will provide you with the necessary funds to deal with the financial consequences of such a tragic event.

1.4 Offer a Great Staff Benefits Package

The vast majority of businesses now offer their employees quality benefits packages. We recommend adding group life/critical illness insurance or group income protection to your company’s employee benefits package, because this will:

• Show that you are a caring employer who values his employees, which in turn will help you to attract and retain valuable staff members.
• Ensure your employees that their/their family’s financial future is secure in the event of something unforeseen happening to them. This knowledge will in turn enable them to focus better on their work (as opposed to continually worrying “What if?”), which will, of course, increase their and subsequently your business’ productivity and profitability.

1.5 Protect Commercial Debts

Business loans (i.e. development loans, commercial mortgages, etc.) are typically secured against company owners, directors and/or shareholders. The individuals against whom loans are secured are known as guarantors. Should one of these guarantors become critically ill or die, it is highly likely that such loans may become immediately repayable in full. We highly recommend ensuring these loans can be repaid without affecting your company’s financial security/future by taking out business loan protection.

1.6 Protect Your Company’s Shares

Many companies have two or more owners/shareholders. Should one of these owners/shareholders die, their shares will usually go to their next of kin/family. If family members have no knowledge of/interest in the business, they may sell these shares to third parties and potentially even competitors. This, of course, could significantly reduce your control over your company and its profitability.

We therefore recommend taking out director share protection. Also known as share protection, ownership protection or partnership protection, director share protection is essentially life insurance taken out on owners/shareholders. Paying out a lump sum upon the death of a shareholder, such a policy will enable remaining owners/share holders to purchase the deceased director/owner’s shares from the next of kin/family without having to raise/borrow the necessary funds to do so, ensuring they retain control of the company and thereby ensuring its financial future. Critical Illness can also be included.

1.7 Take Out a Relevant Life Plan

A relevant life plan is a life and critical illness insurance policy, with the director/employee being insured on the policy. The premiums are paid for through your business, as opposed to paying for life insurance out of your personal accounts. In the event of the death of the person insured, the funds will be paid to their chosen beneficiary and in the event of a critical illness the funds can be paid directly to the person insured or their chosen beneficiary. Such a policy will help to protect your family’ financial future in the event of your death or critical illness diagnosis. It is also an option to have a relevant life plan without the critical illness benefit.

2. Planning for and Protecting Your Personal Financial Future

Planning for and protecting your personal future is as important as it is to protect your business. The following tips should help you to do just that. 

2.1 Protect Your Mortgage

Imagine, for a moment, what would happen if you were to unexpectedly develop a critical illness or die. Would your family be able to repay the mortgage on your home and remain within the property? Taking out mortgage protection insurance will ensure your home and your family’s financial future are secure.

2.2 Build Up a Nest Egg

Regular savings can go a long way towards securing your personal financial future.  Options to consider include, for example, ISAs or Stocks & Shares ISAs; a premium bond, as well as deposit accounts. It is important to consider tax efficient savings.

2.3 Make the Most of Your Pension Fund

It is important you plan adequately for your retirement by funding a suitable pension. A good financial planner can help you make the best choices both in selecting the most suitable savings option and making the most out of your pension fund.

At Spectrum Financial Advice, we are ready to assist your business with impartial protection recommendations that will ensure security for your professional and personal future.

For a no obligation discussion, please contact us today on email info@spectrumfa.co.uk, phone01279315013 or use our contact form.