So. You've filed your tax return, and it turns out that your expenses are higher than your income.
It's obviously not ideal. But what do you do now? Should you be worried?
Know that it isn't the end of the world (or your business)
Have you been making enough money to pay your bills and eat? Okay, good. Then you're probably fine.
The truth is, many (maybe even most!) businesses make a loss in their first year, or first couple of years.
It's expensive to start a business! And it takes time to build up a steady roster of clients and customers. So please don't be disheartened by this. It doesn't mean you're a failure or that your business dreams are dead.
Find out whether there are any areas you could be cutting costs
As much as it's quite normal to make a loss at the start of your business, it's obviously not ideal.
Take some time to look, really look, into your expenses and see if there have been any costs that you could have avoided or got a better deal on.
This could include:
- internet costs
- business insurance
- office costs (do you really need a Paperchase notebook or would a £1 version from Tesco suffice?)
- automation software like Buffer, Asana, Dubsado, BoardBooster, etc.
- Web hosting
- Stock and raw materials
One-off purchases, like buying a computer, for example, you won't need to buy again anyway, so there's a saving straight away!
And equally, investigate your income and see if there are any changes you could make there to increase your income.
Are your prices a true reflection of the value you offer? If your services are all low priced, could you introduce a premium service? What about so-called passive income like e-courses, ebooks and affiliate marketing- could you incorporate any of those to give yourself a bit of wiggle room?
Don't just track your finances, analyse them and make sure you aren't tripping yourself up.
Take advantage of the tax savings
A loss means you don't need to pay any tax. Woohoo!
You can also carry your loss over to next year and use it against those profits - so even when you start making a profit, you'll have a little less tax to pay.
Alternatively, you could offset the loss against any other taxable income you have, from savings for example, or claim it against your profit from a previous tax year and get a refund, if this isn't your first tax return.
What I want you to take away from this blog post is that it's totally normal to make a loss in your first few years of business, and as long as you're aware of why there was a loss and know to prevent it next time you should be okay.
I'm a financial coach and mentor helping female business owners to gain the knowledge and confidence they need to manage their finances successfully and have a positive relationship with money. If you're ready to take control of your finances, click below to find out how I can help you.
I also have a range of amazing resources which you can use to help improve your business finances.