FROM keeping tabs on cashflow and minimising tax bills to making forecasts and reviewing supplier arrangements, business owners have a lot on their plate. Dan Morgan, managing partner at Haines Watts, Esher, has some tips to ensure financial issues don’t distract from the day-to-day operations of business.
Things to be mindful of:
1. Working capital cycle
Proper management of working capital is fundamental to operational success. It is a key indicator of how efficiently your company is operating and how financially stable your business is in the short term. Working capital management helps you track whether you have the cash flow to cover short-term debts and expenses. This is particularly important if you’re going for an additional round of funding or reporting to your bank.
2. Cash flow forecasting
In these uncertain times, being able to predict the cash your business will need to survive is crucial. Accurate forecasting will help you to plan, take advantage of cash surpluses and also alert you to any potential risks.
3. Interpreting financial ratios
Ratios are mostly a reflection on past performance, but they do provide a valuable tool for evaluating progress against internal goals. They also provide a measure against which you can compare the performance of your business against that of a single competitor or your industry more widely. Financial ratios can be a powerful tool for identifying trends and safeguarding your business against market dynamics.
4. A formal financial growth plan
A financial growth plan works hand-in-hand with your strategy and provides insight on how you expect your business to perform, where the financial risks may lie, documents levels of funding you have access to and outlines plans for access to future funding.
Dan Morgan said: “Many business owners I talk to, particularly those in the early stages of growth manage the financial role personally. While there is no doubt having a sound understanding of and grip on the financials is essential, there comes a time when you may need a dedicated expert to take on responsibility for the finance function.
“There are a variety of options available to business owners who need support with the financial aspects of running a business – talking to your professional advisors before this becomes an issue is key.”
