If you run a small business or plan to start one, you’ll need to consider how to organise your finances for success. When it comes down to it, a business isn’t a business without money. But it’s useful to be aware of common challenges and opportunities of small businesses that you might face. You can prepare to overcome these challenges and take advantage of the opportunities. 

This guide will cover common challenges and opportunities of small business, including: 

  • Maintaining profitability 
  • Improving cash flow 
  • Financial accounting 
  • Using tax deductions 
  • Cost-cutting opportunities 
  • Finding grants and investment opportunities

Common challenges of small business 

Owning a small business can be rewarding, but it can also take a lot of effort, especially when it comes to your finances. But if you’re aware of the challenges and opportunities of small business, you can manage it all better. We’ll start by covering some of the key challenges. 

  1. Maintaining profitability

Profitability is one of your main concerns of any business. To keep afloat, you need to earn more money than you spend. Plus, a lack of profit can hurt a small business more quickly since it’s on a smaller scale. 

It’ll be hard to understand your profitability if you don’t closely analyse what you spend and sell. Over time, if you spend more money than you earn from sales, you won’t be able to cover necessary expenses. So, it’s crucial to understand your performance and calculate how much you need to earn to stay profitable. 

How to prepare

Once you understand what you need to earn to be profitable, you can build sales goals and strategies for increasing sales. For example, you might focus on marketing or advertising or offer a discount. 

You’ll also need to form a clear budget for your business, which outlines what you’ll spend based on your earnings. By analysing your finances, you can alter the budget to suit your business and cut costs that aren’t helping you increase earnings. By increasing your profitability, you start saving some earnings for growth. 

  1. Improving cash flow  

On top of profitability, you’ll need good cash flow to cover your regular business expenses. Cash flow is the amount of money that flows in and out of your business over a period. For example, while you may earn £2000 of profit in one month, you may only convert £1,500 of that into cash. It may take time for clients to pay out invoices or credit to become cash. 

To understand how much cash flow you need, track your monthly spending. You must have the cash to cover necessary expenses when they’re due. 

How to prepare

To improve your cash flow, you might create a strategy to convert sales into cash as quickly as possible. For example, you could ask clients to pay invoices in 14 days and send reminders to those who are late. Or, if you sell less expensive products, you could promote cash payments. 

  1. Financial accounting and taxes 

Organising your financial accounting, or the mandatory recording of financial data, can be overwhelming when you run a small business. But these records are essential to tracking your business’s success. By overcoming the challenges of financial accounting, you can stay on top of and improve your profits and cash flow. 

Self-employed persons complete the Self Assessment tax returns to report their taxable income. Organised accounting practices will help you remain tax compliant and avoid accidental tax evasion. Plus, the HMRC expects you to keep your financial records for about six years. 

How to prepare

To prepare for the challenge of staying on top of your transactions, first open a business current account if you haven’t already. This unique bank account for your business will help you keep your business finances separate from your personal ones. As a result, it’ll be much easier to find and record relevant expenses and earnings. 

Aside from that, consider investing in modern accounting software that simplifies and automates the process, like Countingup. Countingup is a business account with built-in accounting software that streamlines your financial management process. It offers valuable features that save you time, like receipt capture, which reminds you to store photos of your receipts after making a purchase. 

On top of this, automatic expense categorisation instantly labels your transactions with HMRC approved categories. This feature makes it easier for you to find and record business expenses. 

Opportunities for small businesses 

We covered common challenges to consider, but there are also plenty of opportunities you may want to take advantage of. Knowing the challenges and opportunities of small business will help you plan for success. 

Tax deductions 

It’s important to know which expenses you can claim as a tax deduction, or something that reduces your taxable income. With this knowledge, you can record these expenses and claim them to pay less in taxes. The more you can save on taxes, the more money you can keep for your business. 


There are many funding opportunities for small businesses that might help you. You can start or grow your operations more quickly by applying for and earning grants. You can learn more about grant opportunities here.  

Business tools 

With a small business, your smaller operations mean you can take on different jobs yourself rather than outsourcing them. This opportunity can save you money on your operations. For example, you can use tools like Countingup to manage your own finances. You could also save money by doing your own marketing. As a result, you can cut costs and spend less on running your business. 

Simplify your small business finances with Countingup 

Financial management can be stressful and time-consuming when you run a business. That’s why thousands of business owners use the Countingup app to make their financial admin easier. 

Countingup generates cash flow insights and year-round tax estimates to help you track your business’s finances and avoid surprises come tax season. With this information, you can overcome challenges and make better business decisions.

Start your three-month free trial today. 

Find out more here.