Keeping on top of the financial management of your business can be hard work.

It’s possible to have a profitable business that is struggling to find the cash flow to pay expenses and fund growth. Likewise, you could have positive cash flow but are not turning a profit, particularly if you are scaling.

Turning a profit is at the heart of running any successful company

But without an even and predictable flow of cash into the company, you can’t cover your overheads, you can’t pay your employees, and you can’t run your day-to-day operations – let alone think about expanding and growing the business.

In the end, you need both. But if you’re going to be in control of your financial destiny, it’s important to get your head around the important process of cash flow management.

Let’s look at 6 key things to understand about your finances:

• 1. Profit is a by-product of a successful business – as the owner, you want to make profits, but profitability isn’t the only goal. A business can easily be profitable but also be highly unstable in the longer term. What you want is stability and consistent revenues.
  2. Cashflow keeps your business alive – good revenues (income) serve to bring cash into the business. Without cash to cover your operating expenses, you have no means to keep the lights on in the business. So cash really is king!
  3. Know your cost base and overheads – the flipside of your cash flow position is your costs. In an ideal world, you want more cash inflows than cash outflows, so it’s important to know your expenses and costs and to manage them carefully.
  4. Be proactive about spend management and easing expenditure – if you can take action that reduces your spending, that is hugely positive for your cash flow position. Choose cheaper suppliers, negotiate better deals and bring that cost base down.
  5. Drive more revenue, through increased sales and marketing activity – if you can increase your revenues, you also boost your cash flow. So, it’s important to be proactive about running targeted sales and marketing campaigns to increase your sales.
  6. Keep the cash flowing and the profits take care of themselves – if you achieve the ideal cash flow position, the company sits on solid financial foundations, the cash is there for investment and the business can grow. It’s that simple.

Talk to us about improving your cashflow management

Whether you’re new to running a business, or a seasoned owner who needs some financial support, we can give you the cash flow advice you need.

We’ll review your finances, delve down into your cash flow, and will come up with keyways for you to increase your cash income and reduce your cash expenses. It only takes a few small changes to achieve a far better cash flow position for your business – helping you maintain positive cash flow AND generate profits.

The following content was originally published by BOMA. We have updated some of this article for our readers.

In a world where evolving political events can change the market in an instant, and economic instability is still the norm, finding certainty in your business strategy is a rarity.

Business plans and your overriding strategy are no longer written in stone. This means being flexible about your next steps and regularly reviewing your business strategy.

Let’s see how frequent strategic business reviews can help you reduce the uncertainty.

1. Get proactive with your financial forecasting

Review your financial position, metrics and reporting as regularly as possible.

Produce rolling cashflow forecasts to keep on top of your cash position and run scenario planning to look at the best, base and worst-case scenarios. This gives you the best possible visibility into the company’s financial health and gives you enough time to spot the potential shortfalls, understand your cash runway and make adjustments to your spending.

2. Diversify your revenue streams to reduce risk

As part of your strategic review process, you should be looking for opportunities to diversify as a business, generating new and potentially profitable revenue streams.

Explore whether there are new products or services you might offer, and whether you could target new and, yet, untested customer segments. Increasing your online presence to sell more through e-commerce channels is another option. If you can reduce your reliance on a single income source, this reduces the risk level and strengthens your resilience against sudden market shifts or economic downturns that might, potentially, affect one area.

3. Make your operations more agile and efficient

A key part of any strategic review is to focus on driving operational efficiency in the business.

Review your operational workflows on an ongoing basis and look for inefficiencies you could remove, or efficiencies you could add. Embrace flexible models, like outsourcing or adaptive supply chain strategies. This gives you the agility needed to adjust your production or service delivery in response to changing demand or disruptions.

4. Strengthen your customer and supplier relationships

Trusted relationships with your key stakeholders are a vital element of broadening your network, adding stability and making the company a stronger proposition.

As part of your strategic review, analyze your existing customer relationships and supplier relationships. Look for simple ways to strengthen and nurture these connections. Customers want to feel valued, and suppliers are always looking for ways to build greater trust. So, make sure you’re building bridges, communicating openly and nurturing these critical relationships.

5. Invest in technology and data analytics

Digital technology forms the foundations of any forward-thinking small business.

Collecting and analyzing data gives you the foundational information needed to make informed decisions during your strategic review. Use the latest data analytics tools to review market trends, customer behavior and your own internal performance as a business. These outputs will provide actionable insights, making it easier to define your strategy and change direction. Let’s review your business strategy

Doing business is unpredictable at the best of times. But taking the time to review your performance, strategy and business plan is a vital way to reduce this uncertainty.

Book in some time for a strategic review of your business and let’s work together to spot the inefficiencies and find the opportunities for diversification and increased efficiency.

The following content was originally published by BOMA. We have updated some of this article for our readers.

Understanding your finances is a vital part of running your business.

But getting down into the nitty gritty of the company accounts isn’t every entrepreneur’s top skill. If you are new to company accounting, or simply want to expand your knowledge, we can help explain the foundational reports.

The profit and loss report and the balance sheet are both key reports when it comes to getting in control of your company’s financial health.

What’s a profit and loss statement?

Your profit and loss statement are commonly called your P&L, but is also referred to as your income statement or statement of earnings. It’s a full breakdown of your company’s revenue (money coming into the company as sales and other business income) and your expenditure (direct costs, overheads, expenses and other costs).

As a business, you obviously want to turn a profit and make money from your venture. Careful observation of your P&L allows you to track your revenues and expenses over a set period of time. You can then look back over the period and see exactly where you’re making money, and where you’re losing money. The more you make, and the less you lose, the greater your profits will be at year-end – and your P&L is your barometer for measuring these metrics.

The P&L statement is good for:

• • Giving you a breakdown of all revenues and relevant costs and expenses
  • Showing the profit and loss figures over a set period
  • Summing up your profit and loss for the period to gauge if you’re profitable.

What’s the balance sheet?

The balance sheet gives you a snapshot of your company’s financial health at a given point in time, based on the following accounting equation: ‘Equity = Assets – Liabilities’

The balance sheet shows you the company’s:

• • Assets (the things the company owns, including cash)
  • Liabilities (the things the company owes other people)
  • Equity (retained earnings plus the funds you originally invested as shareholders)

Unlike the P&L – which shows you the revenues and expenditure over the course of a given historic period – the balance sheet is best seen as a ‘screenshot’ of your current finances. In a nutshell, it shows you what the company is worth on paper right now, based on the current numbers in your accounts. So, it’s a vital tool in your accounting toolbox.

The balance sheet is helpful for:

• • Assessing the current financial position of the company
  • Providing evidence of your financial position to banks, lenders and investors
  • Giving potential buyers an idea of the company’s tangible net asset value, if you plan to sell up.

Talk to us about expanding your accounting skills

If you don’t know your assets from your equity, we don’t blame you. Accounting can be complicated, and it takes time to fully grasp all the different terms and processes.

But if you’d like to know more about the basics of your company accounts, we can help. We’ll be happy to run you through your latest management or statutory accounts and explain exactly what each report means – and how it reflects your current performance as a business.

The following content was originally published by BOMA. We have updated some of this article for our readers.

For centuries, accounting was all about reviewing historic information – but that only told you about the past, not what was going to happen in the future.

If you’re only looking back at past periods and historic numbers, this limits the insights you can achieve for your business. With a backward-looking ideology, it becomes difficult to plan, run through different scenarios or understand the path of the business going forwards.

Forecasting changes this. With the right data analysis and forecasting tools, you can project sales, cash, revenue and profits into the future – and get in control of your business.

A forward-looking view of your business journey

Forecasting switches the focus of your financial management. By moving to a forward-looking view of your business journey, you can see further down the road – and that helps to spot any opportunities and avoid common business pitfalls.

Forecasting adds value by:

• • Highlighting the data patterns – a forecasting tool takes your historic data and projects it forward in time. This helps you and your advisers spot patterns, trends, gaps and opportunities, revealing the true ‘story’ behind your business accounts. For example, forecasting may reveal a predicted seasonal slump in the next quarter, allowing you to plan ahead and proactively take action to minimize negative impacts.
  • Giving you a future view of your business – instinctively, business owners will look back at prior periods to assess performance. There’s value to reviewing your historic actuals, of course, but using forecasting helps you to look forward, rather than just backwards. Forecasting is the satnav, showing you the road ahead, rather than the rear-view mirror showing you the road you’ve already travelled.
  • Helping you scenario-plan – with a financial model of your key drivers, combined with accurate forecasting, you can quick answer your burning ‘What if…?’ questions. Forecasting lets you run different scenarios, with different drivers, to see how business decisions may pan out over time. If option B performs better than option A, that’s invaluable information when defining your next strategic move.
  • Making informed, evidence-based decisions – having ‘the full picture’ of combined historic numbers, forecasts and longer-term projections aides your business decision-making. Forecasting gives you solid evidence on which to base your strategy and helps to red flag any threats that are looming on the horizon – giving you the best possible information to keep your executive team informed and on the ball.
  • A deeper relationship with your accountant – forecasting also helps us to get a far more granular view of your business. This helps to spot potential areas of performance improvement, and to give you the best possible strategic advice, all backed up by solid, empirical data and management information.

Talk to us about the benefits of forecasting

If you want to get in control of the destiny and results of your company, come and talk to us. Forecasting helps you highlight your future threats and opportunities – and create a proactive strategy to improve the performance of your business.

The following content was originally published by BOMA. We have updated some of this article for our readers.

At the early stages of your start-up journey, access to credit can be a lifesaver.

Cashflow is tight, customer revenue can fluctuate wildly, and large-scale bank loans and external funding may be in short supply. In this situation it might seem counterproductive to apply for a business credit card – a move that adds to your debt level.

But, in fact, applying for a company credit card and using that credit facility responsibly can have a hugely positive effect on your ability to fund your growth and access lines of credit.

Let’s explore five ways that a business credit card can improve your funding

1. Builds up your business credit profile

When you use a business credit card responsibly, and pay off the repayments each month, this starts to build up a credit history for the company. This credit profile is directly linked to your business and is separate from your own personal credit.

Having this credit history (and the associated business credit score) is crucial when applying for business loans and accessing future, large credit lines.

2. Establishes you as a responsible borrower

Paying your credit card bill on time each month demonstrates your financial discipline and an ability to manage debt in a responsible way.

When applying for loans, bank overdrafts and trade credit, lenders want to know that you’re a low-risk business to lend to. Responsible payment behavior acts as an indicator of trustworthiness for future borrowing and will increase your chances of successful funding.

3. Provides a flexible line of credit

Having a business credit card makes it easier to cover your expenses and overheads.

A credit card gives you flexible, accessible funds for your day-to-day operational needs. It’s also an excellent way to cover any unexpected expenses or cashflow gaps. Managing this line of credit also prepares you for larger, more formal, credit facilities.

4. Demonstrates a prudent use of credit

Your credit utilization rate is a key metric that credit reporting agencies will be interested in.

By not maxing out the available credit on your credit card, and keeping utilization low, you can show that your business manages debt in a sensible way. This marks you out as a low-risk borrower – a key factor in accessing further credit, business finance and investment.

5. Acts as a gateway to more favorable terms

By being responsible with your credit use, you set the foundations for a business credit profile.

A solid track record with a business credit card may lead to pre-approved offers for larger credit lines, better interest rates and more flexible terms from banks. This is incredibly helpful as you scale the business and need additional funding to drive your growth journey.

If your startup needs an increased cash runway and improved access to credit, applying for a business credit card is an excellent way to improve your financial flexibility.

Come and talk to the team about ways to embrace this kind of credit.

The following content was originally published by BOMA. We have updated some of this article for our readers.