Your Business Is Making More Money… So Why Do You Feel Skint?

My Business Is Making More Money… So Why Do My Pockets Feel So Empty?

You look at the figures and things seem to be going well. Your turnover is up. You're getting more customers. You're taking on more work than you were this time last year. So why, when you look at your bank account, are you thinking: “Where has all the money gone?” 😩

It's a question plenty of business owners across Durham and the wider North East will recognise. Because making more money doesn't necessarily mean having more money available to spend. As your business grows, so do the demands on it.

Your costs might have increased. Materials, fuel, insurance, software and equipment can all add up. Perhaps you've taken on an employee, moved into larger premises or bought a new van. Then there's tax. A profitable year can still leave you with a sizeable tax bill, particularly if you haven't been putting enough aside as you go.

VAT can add another layer of confusion. Money may come into your business, but not all of it is necessarily yours to spend. Some of it may ultimately need to go to HMRC.

Then there's the bank balance. You see £20,000 sitting there and think:

“I've got £20,000. Great!”

But do you?

How much of that money is needed for VAT? Your next tax bill? Wages? Suppliers? Next month's expenses? And that's where cash flow matters. Profit and cash aren't the same thing. You can have a profitable business and still experience periods where cash is tight. Equally, your bank account might look healthy today while you have significant bills waiting around the corner.

And here's the slightly strange thing about business growth: Sometimes growing can actually make you feel poorer. You might be reinvesting money into new equipment, stock, staff, premises or marketing. You're spending money because you believe it will help the business grow.

That isn't necessarily a problem. But you need to understand what your numbers are telling you. This is where an accountant should offer more than simply preparing your accounts once a year.

You should be able to ask:

• Where is the money going?

• Are my profits actually increasing?

• How much should I be setting aside for tax?

• Can I afford to employ someone?

• Can the business afford that new van or premises?

• Am I taking too much money out — or could I actually take more?

And perhaps the most important question: Do I really know what my business can afford? These aren't just numbers on a spreadsheet. They're real decisions that affect your business and your plans for the future. That's why we believe accountancy should be about more than looking backwards at what happened last year. Your accounts should help you understand what's happening now and make better decisions about what comes next. Sometimes the answer might be simple. Sometimes you may need to make changes. And sometimes you might discover that your business is actually doing much better than you thought — you just weren't looking at the right numbers.

At North East Accounting, we work with sole traders, contractors, tradespeople, property businesses and growing SMEs across Durham and the wider North East. We combine accountancy with specialist tax expertise, so when you're asking “What should I do next?”, you've got someone to talk to. So, if your business is making more money but you're wondering where it's all gone, don't automatically assume something is wrong. It might simply be time to take a proper look at the numbers.

Because more turnover should mean more opportunity — not just more things to pay for. 😉

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