Understand the pennies and the pounds will look after themselves!

Many owners/managers of small businesses (and larger ones for that matter) struggle to understand their business finances. This lack of understanding can make it very difficult for them to make the right decisions for their business.

Now, I am sure my accounting colleagues would not mind me saying that, most accountants make lousy entrepreneurs. We just lack the creativity and drive which makes entrepreneurs so effective at getting new business ideas off the ground.

So why should entrepreneurs/business owners be great accountants?

Each role requires an entirely different skill set and way of working and, indeed, a different personality type (if you are familiar with DISC profiling). So don’t be shy about admitting that you are stuggeling with the money side of your business.

Many business owners do not seek the proper help and guidance, or have the right level of financial information, to help them make decision.  To me this is a huge mistake which can lead directly to business failure. As a responsible business owner/entrepreneur you do not need to be a trained accountant but you do need to have enough knowledge of financial issues to run your business effectively.

So what do you need to do to get this knowledge? Well, for starters:

  1. Ask lots of questions of your accountant about why the figures are as they are.
  2. If you only receive figures from your accountant once a year, several months after the year has finished, this is not enough! You need to have regularly updated financial information to make decisions on a timely manner.
  3. Have a properly thought through profit and loss and cash flow forecast so you can manage your cash – and make sure it is regularly updated for what has actually happened.
  4. Don’t just be happy with knowing how much you have sold in total and the margin on this total figure. Ask how you can get information on individual customers, products and projects so you are clear which activities are profitable – and which not.

It is not good enough these days to just shrug and say “Well, I am just not good with figures”. You started your business to make a living for yourself, and any staff you have, and you owe it to yourself, and them, to have a good handle on the money in your business.

To help I have written “your guide to understanding business finances” which can be downloaded for free from my website www.fionabevanfinancialmanagment.co.uk

Good Luck

Fiona 🙂

Its a small (business) world!

Small businesses are the mainstay of the UK economy. Forget the large companies – small businesses are where it is at!

The UK is a nation of entrepreneurs and we brits are great at taking the plunge into business ownership – whether it is a self employed professionals or as small business owners employing staff.

However, for many entrepreneurs taking the plunge is not the hardest part – it is running a successful company in the longer term that provides the stress.

The problem here is that the prospective entrepreneur has often not done their homework.

In particular:

  1. They have an idea they are sure is going to work, but have not done a full business plan to explore whether it can be converted into a successful business.
  2. They have not consulted appropriate professionals to ensure their company is set up in the best way.
  3. They don’t align their personal and business goals. They soon find their business running their lives rather than them running their businesses.
  4. They don’t finance their business sufficiently from the outset, which means they can never afford to do jobs properly. Marketing in particular often suffers in this scenario.
  5. Because they haven’t planned properly they don’t fully appreciate the risks involved in setting up their business until it is too late.

Starting your own business is a BIG step. If it fails you may not just lose your livelihood but also your house (and your family if you have had to work very long hours).

It makes sense to give your business the best possible chance of succeeding.

To help I have written a guide on starting your own business which can be downloaded for free from my website www.fionabevanfinancialmanagement.co.uk

I have tried to cover all the issues you will need to think about before taking the plunge as well as some of the things which might trip you up.

Enjoy!

Fiona J

 

Don’t be an April fool!

Over the years I have met business owners who offer a great product or service but are really struggling with their cash control.

One of the reasons is exemplified by a conversation I had yesterday with just such a business owner. They have no problems finding the right customer and do a fantastic job for these customers.

However, the business owner has a real stumbling block when it comes to invoicing and debt collection. Firstly, they hate the process of invoicing itself – it is a chore they put off as long as possible. Secondly, once the invoices have gone out they are very reluctant to chase for the money owing to them.

In my opinion they are being an April (and every other month of the year) fool.

They are working hard but because they are not following through, and collecting the money owing to them in a timely fashion, they are struggling to pay their bills.

What makes the situation worse is that they have employees they MUST pay every month irrespective of whether the business is paid or not.

There is a clear lesson to learn here – if you are unable, or unwilling, to deal with the discipline of invoicing and debt collection you must find another way of getting these jobs done. If you don’t, you may lose your business.

So what are the alternative approaches you can take?

Firstly, many bookkeepers are more than willing, and able, to take on the invoicing and debt collection roles for  you. The benefits of delegation will way out-weigh the costs.

Secondly, you may already have a member of staff on your team who can take on these jobs.

Thirdly, if you really have to do these jobs yourself, you must change the way in which you approach them. Have a very clear procedure detailing exactly how often invoicing should be done (at least once a week would be my recommendation), block out time in your diary every week devoted to invoicing and debt collection, and understand that any work you do for clients is worthless unless you are paid for it!

For extra help with invoicing and debt collection please download the ‘Getting Paid’ guide on my website http://www.fionabevanfinancialmanagement.co.uk/guides.php

Good luck

Fiona 🙂