Cash flow is the lifeblood of any business and therefore it is essential that businesses manage their finances effectively. No matter how healthy your balance sheet appears in terms of the physical assets your business owns or the money owed to your business, your ability to convert sales into actual cash at critical times is crucial to the survival and continued growth of your business.
Useful information
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Financial Management – Understanding the basics
As a business owner, regardless of whether you use an Accountant, it is important to have a good understanding of your business’ financial situation. There are 3 key elements of financial management:
- Financial planning – making sure you have enough money at the right time
- Financial control – understanding when and where money is coming in and going out of your business
- Financial decision-making – having accurate information to hand to enable you to make informed decisions about your business, now and in the future.
The first step to effective financial management is to estimate your income and costs – this is a forecast or budget. These figures feed in to the following financial statements about a business:
- Cash flow statement – shows money going in and out of the business each month. This is a useful management tool.
- Profit & Loss Account – shows the sales your business has made minus the costs of generating those sales. This statement tells you how profitable your business is.
- Balance Sheet – shows a snapshot of your business at a particular moment in time. Shows what your business owes, is owed and is worth.
The Growth Hub have access to a wide range factsheets to increase your understanding of these topics.Â
Avoiding Cash Flow Problems
Here are some top tips to maintain good cash flow:
- Establish good credit control procedures
- Check that customers are creditworthy
- Invoice as soon as work is completed
- Offer incentives for customers to pay early
- Make it easy for customers to pay
- Negotiate better terms with suppliers
- Plan ahead for expenses such as utility bills and tax payments
- Budget for, control and reduce costs wherever possible
- Have systems in place to monitor your cash flow regularly
- React quickly if you anticipate cash flow problems!
Ways To Finance Your Business
A business needs to be appropriately financed at all stages, from start up to growth.
Whether you are looking to raise finance for a new business venture or find investment to support the growth plans of your existing business, there are many things to consider before deciding which source of finance is right for your current circumstances and plans.
There are many finance options that businesses might consider at various stages of their journey, including Business loan, Equity finance, Hiring or leasing (equipment, machinery) and business grants.
Any provider of funding or finance will want to see a robust business plan and financial forecast which clearly demonstrates the viability of your business.
The Growth Hub team have access to a wide range of finance factsheets and resources to support you – from business planning, cash flow forecasting and raising finance through to maintaining good credit control and avoiding cash flow problems.
The Growth Hub team can also talk to you about finance options and help to link you to appropriate free or subsidised financial advice schemes.  Get in touch with us today.
Tax reliefs available for Innovative Companies
Contacts and guidance information provided by HM Revenue and Customs.
- Patent Box
- Research and Development Tax credits (R&D), (including Advanced Assurance)
- Creatives Tax Reliefs (Film, Animation, High End TV, Children’s TV, Video Games, Theatre, Orchestra, and Museums and Galleries)
- Enterprise Investment Scheme (EIS)
- Venture Capital Trust (VCT)
- Seed Enterprise Investment Scheme (SEIS)
Other Useful Links
- British Business Bank | Understand Your Finance OptionsÂ
- British Business Bank | Business Guides
- ICAEW British Finance Advice Scheme | Businesses can access a free consultation from an ICAEW chartered accountant
- Access to Finance Platform | A community forum to help you stay up to date with funding news and opportunities
