As a small business owner, there are many things you will need to learn or will inevitably learn along the way. One of the most important things to know as much as you can about is the financing of your business and how to deal with the finances of a small business.
Here are some basic tips to get you started:
- Even before you start trading, find a bookkeeper or an accountant. He or she will help you set up systems, tell you what you need to be recording and advise you on financial matters such as gaining additional finance and how to make yourself attractive to investors. Whether it is the bank or private investors, your accountant can help you put together a strong pitch for your business.
- Turnover is vanity, profit is sanity but cash is reality. Cash is king – always keep a close watch on cash flow. It’s an old but relevant business mantra stressing the importance of being aware how much cash you have available to you. If you are expanding, have you got enough cash to see you through?
- Plan and forecast. Cash flow, what’s due in and what’s due out. Keep an up to date and detailed record of the amount of cash you have in your business bank account based on recent sales, turnover and profit. By keeping an eye on this, it will give you a better idea of what you have available to you to help you plan for growth, how to pay the bills etc. Ideally it is beneficial that you put together a cash flow forecast, if you need advice speak to a bookkeeper or accountant. There are also plenty of examples of cash flow forecasts online for your reference too.
- Measure, monitor and adjust. Once you have your plan and your forecasts, you need to keep them up to date by adjusting them when necessary. By keeping an eye on figures, sales and costs, you can act accordingly to changes and your adjusted projections to keep your business moving.
- Buy assets carefully. Make sure you use the appropriate finance options for you and your company, your accountant can help you with to discover the best solution for you. Avoid swallowing up cash flow by buying fixed assets and instead look into options such as hire purchase and other suitable types of finance.
- If you supply on credit, have a good system for collecting what is due to you. If you are not good at this, then outsource it to a reliable company that can do this for you.
- Be careful when expanding – have you got enough cash to see you through? If not, you’ll have to put a plan together to gain the additional funding required and this is where you need to make yourself attractive to potential investors.
- Watch your costs – they can creep up especially if you are busy or if sales dip and you do not reign in the costs.
- Take advice and accept constructive criticism but then make your own decisions.
So there you have it, our thoughts on the things you need to know when it comes to looking after the finances of your small business. Whether you are just starting out or you are trying to expand further, paying attention to these areas can really help you succeed in this important area of your business management.