7 steps to financial success as a new business

Technology has lightened much of the financial workload for business owners. But to safeguard the long-term financial success of your business, it’s important to have a solid grounding in the basics of finance, accounting and business best practice.

Whether you’re a brand new tech startup at the early stages of trading, or an established family business that’s been growing a customer base for decades, there’s always value in listening to the latest business finance advice – and aiming to get more from your financial processes.

To help you get in control of your numbers, we’re going to share 7 fundamental tips and hints for taking the guesswork out of balancing your bottom line.

 

1. Have a plan and a budget

Having a proper business plan is essential for any business. The level of detail will vary – dependent on whether you’re setting up a new venture, or looking at the next stage in your growth – but having this route map will make sure you know where you’re going and how to get there; financially, operationally and strategically.

To flesh out your plan:

  • Define your business goal – decide where you want to get to, and the timescales for getting there. This can be a key financial goal (10% growth in turnover in the next financial year) or a strategic goal (opening 5 more offices this year).
  • Set out your budget – cost out the finance needed to attain your goal, and get a drilled down budget together, with a breakdown of the investment you’ll need to secure.
  • Plan how you get there – set out a clear, workable operational strategy for attaining your goal, aligned with your budget and with key milestones along the way.

 

2. Access the right funding

Having the right level of funding is crucial. Unless you already have significant cash reserves to dip into, you’re going to need some additional funding to bring your business plan to life.

For most small business ventures, you’ll be looking at four main funding options:

  • Put your own money in – if you’re at the early stages of growth, self-financing may be an option. But bear in mind that money you invest is then locked up in the business.
  • Talk to your bank – a meeting with your bank manager is a traditional port of call when cash is needed, but factor in the interest you’ll pay (and the return the bank will want).
  • Attract some investors – if investors can see the long-term potential in the business, they’ll be happy to provide funding. But investors will also want to see a secure return on this investment and, as a result, they may want some control over the running of the company.
  • Look at alternative funding – Crowdfunding sites like Kickstarter or Funding Circle are one funding avenue to explore, as well as looking into the viability of using alternative financing options such as iwoca or Market Invoice.

 

3. Set KPIs and keep score

Keeping track of your performance keeps you on course, as any experienced business owner or entrepreneur will tell you. It’s rare for a business plan to run entirely as predicted, so it’s important to measure your performance and take corrective action where it’s needed.

Without knowing your performance to date, you don’t know what’s working and what isn’t. And without this information, you can’t react to fine-tune and adjust your plan accordingly.

To monitor your performance:

  • Define your key performance indicators (KPIs) – so you know the sales figures, profit margins, cashflow position, operational costs and aged debt number you’re aiming for, and add these KPIs to your reporting dashboard.
  • Track and measure performance – keep a close eye on your KPIs and run regular reports so you have discussion points for finance and leadership meetings.
  • Check your score and take action – closely monitor how you’re performing against your predefined targets/KPIs, and take proactive action to keep on track with your plan.

 

4. Ditch that tired old spreadsheet!

Using a modern cloud accounting package adds huge value, so it’s time to say goodbye to that Excel spreadsheet and start building up a finance system that’s truly fit for purpose.

To benefit from the latest technology:

  • Move to the cloud – and have instant access to all your main business numbers 24/7, both on your laptop and on your mobile devices, with all data securely backed up online.
  • Get real-time with the numbers – and have the ability to produce reporting and KPI breakdowns that are totally up to date, improving your ability to make key decisions.
  • Embrace automation – and let the software do the low-level tasks such as data entry, bookkeeping and credit control chasing, giving you more time to run the company.

 

5. Keep your eye on the cashflow

Managing the company’s cashflow effectively is vital – especially when you factor in the potential impact of a poor cashflow position on your long-term business plans.

90% of UK business failures are due to poor cashflow management in the business, so having that steady pipeline of cash into the company is essential. It’s this liquid cash that allows you to keep trading, so it’s critical that you’re on top of those cash inflows and outflows.

  • Keep spending and costs low – by monitoring your operational cashflow, reducing expenses and overheads and looking to run a lean and efficient business model.
  • Maximise your income – by leveraging all potential revenue streams, setting the right price points and achieving the sales targets that will drive a positive income level.
  • Forecast your cashflow position – using a forecasting tool, like Fluidly, to predict your cash position in the future, and take proactive action to avoid any cashflow issues.

 

6. Chase those late-paying customers

Keeping on top of credit control is an important goal for any business, allowing you to speed up customer payments, reduce your overall debt and boost your cashflow in the process.

To make your credit control function work effectively:

  • Stay on top of debtor tracking – and run regular debtor reports (weekly, at least) so you know who owes money, how much and where your priorities are for chasing
  • Be proactive about chasing – so you’re having the right conversations with late-paying customers, and encouraging them to pay as swiftly as possible. Using the automated email chasing and debtor notifications in Fluidly can help you automate much of this.
  • Make it easy to get paid – and offer customers a range of fast and simple ways to settle their bill, whether it’s GoCardless for Direct Debit, or online card payments with Stripe.

 

7. Look for a top-class accountant

Hiring an accountant is a core way to improve your financial management, allowing you to outsource much of the financial admin work, and get the benefit of having an experienced financial professional on hand to guide the course of the business.

By working with a modern cloud accounting practice, you will:

  • Get your compliance work done and dusted – with most firms offering services to take on the bookkeeping, do your tax and accounts, and deliver regular financial reports.
  • Build up your financial performance – by working with your accountant to monitor the company’s chosen KPIs and find effective ways to boost and improve your overall efficiency, productivity and profitability.
  • Move the business forwards at pace – so you have a driving financial force behind your scenario-planning, decision-making and longer term business strategy.

Keep in control of your cash

There’s no one ‘special sauce’ that will guarantee success for your new business. But by following these key guidelines, and maintaining a solid grip on your financial numbers, you give your company the best possible chance of achieving your main goals.

Set your goals, stay in control of your cash and drive the future direction of the business.