How to Manage Small Business Finances in 2025 and Beyond

The last few years have left directors anxious about how to manage small business finances in the face of so many challenging circumstances. Years on from the COVID-19 pandemic, businesses are still wrestling with its ramifications, and have had a cost-of-living crisis, a Russian invasion, and soaring interest rates to contend with since.

All of these factors and more have made recovery difficult, with some companies still not performing at their pre-pandemic best. With little looking like its going to change on the economic global landscape in the near future though, owners will have to be vigilant with how to manage small business finances.

Changes announced in the autumn budget may also concern small business owners. With some preparation now though, you can make sure your company withstands some of the more difficult policy changes.

By safeguarding your company now by practising sound business finance management, however, 2025 can be a prosperous new year for you.

Prepare for upcoming policy changes

The autumn budget contained a few policy changes that will affect business owners in 2025. The shortfall in the treasury’s coffers has unfortunately led to UK businesses bearing the brunt of the government recovering sufficient money.

The main policy changes to affect UK businesses are:

• An increase in employer National Insurance contributions
• An increase in National Minimum Wage
• A permanent reduction in business rates at 40% for hospitality

The first two policy changes should be at the back of anybody’s mind that is considering bringing new staff in. Think about how much extra each new recruit will cost with the new changes in place. Could it stretch your finances too far?

Restaurants and bars will have to be especially careful when April comes around. Not only will the two changes above kick in, but the change to business rates will also apply. While the hospitality industry has been crying out for a permanent reduction in rates for a few years now, the 40% reduction is coming off the back of a temporary 75% reduction. Considering that plenty of businesses have struggled even at 75%, there’ll need to be some cost-cutting done in preparation for the move to 40% and potentially higher wages.

Don’t allow your finances to scare you

That sinking feeling you get when you check your balance – either when you visit the bank or use an app – is normal. But it is crucial that you know just how much is going in and out of your account at any time

Small business owners would be well served to develop a habit of checking their account every morning via a banking app. Doing this helps to remind you of any outgoings due that day, and highlights any nasty overnight surprises like fraudulent activities quickly. Just this simple act alone can help business owners feel a little more in control of their finances.

Cut out needless expenses

Business travel and expensive lunches can eat away at your cash reserves over the course of a year. Try to question every transaction to determine how essential each expense is. You’ll be surprised at how much you can save.

Take a look at all of your current outgoings and go through each expense with a fine tooth comb. You’ll likely find subscriptions and rolling payments for services you no longer need. Likely culprits are usually software subscriptions (especially anti-virus services), unused mobile phone plans, and overly frequent equipment servicing.

Plan your finances in a way that suits you

There are so many different methods of managing small business finances, that knowing which to one to choose can become overwhelming. As a rule of thumb, however, the very best way of organising your finances is to find a way that will work for you. You could pay for a fantastic new app that everybody else is using, but if you’re more comfortable with a notepad and highlighter, then its unlikely to work for you.

It’s far less stressful to find a method that neatly fits in with the way that you already operate. There will always be new apps and services that promise to revolutionise the management of your finances, but only you know what works best for you and your particular business.

Pay yourself first

Once you are ready to pay your suppliers, services, and savings accounts at the end of the month, don’t forget about the most important person to pay – yourself.

It’s very easy to bypass your own bank account when there are several other things to pay for, but remember why you started your own business in the first place. It’s very unlikely that you went to all that effort for no pay at the end of each month.

If your business can’t support its own owner, then it’s not viable in its current form. Skipping your own wages only skews figures, and can make things seem rosier in your own mind, but doesn’t help in the long run.

Reward yourself for your hard work and look to actively shake things up if taking a wage stretches your business too far.

Be strict with your invoices

As a small business owner, your income depends on the payment you get from your customers. However, from the many experiences we’ve had, we know that directors find that getting funds from their clients on time doesn’t always happen. This can cause a strain on your mental health and wellbeing.

To avoid this problem in 2025, look to implement a few beneficial changes to how you collect money from your clients.

Asking for 50% of the fee upfront not only helps your cash flow, but also makes it easier to identify genuine customers from those that waste time and resources.

Take a look at when your suppliers ask for payment too. If they routinely ask for payment within ten days, but you’re giving your customers 30, you’re bound to run into cash flow problems further down the line.

Look after your cash reserves

Your most important asset as a business owner, is your savings. You can rely on your savings in difficult times or when you want to handle unexpected expenses. Besides that, you can also take a break when you need one.

Without a suitable cash reserve, any unexpected repairs or other expenses can stretch your company’s finances too tight. In order to be comfortable, it is advisable to save 30% of your earnings each month.

Pay your taxes on time

Our tax returns are often put off until the last minute, and are usually at the very bottom of most to-do lists. It’s too easy to forget about tax returns until they need doing, but January comes round far quicker than we often expect, and sees many of us rushing to submit our returns.

This lack of proper preparation can sometimes lead to larger amounts to pay than first realised, or even a fine if the deadline is missed.

The best solution is to prepare your tax returns as early as possible after April 6th. Doing this will help you handle this critical task on your to-do list efficiently and quickly. Also, it informs you of the amount to pay the following January. Thus, you get to avoid any horrible surprises, and have more time to save extra money if needed.

How to manage small business finances in uncertain times

From what we’ve learned over recent years with global pandemics, Russian invasions, and other events, businesses need to prepare for the unexpected. Other factors, such as higher interest rates, can be easier to spot on the horizon.

With this in mind, it’s worth taking time to plan for different scenarios that may happen in 2025. Can the Russian invasion affect other markets if allowed to spread to different areas? Will higher mortgage rates cause more defaults in the banking industry? How might an early general election change UK industry?

Check on how much money you have saved for different eventualities, and have back-up plans such as new business lines in mind should the worst happen. There’s no such thing as being over-prepared.

Need advice?

If your business is struggling due to current economic conditions, we can give you free, no-obligation advice. Call us on 0800 975 0380 or email [email protected]

We’ll listen to your problem and then find a workable solution that suits you and your situation.