Why do some business owners fear the financial side of the business? Could it be that they don’t understand how to prepare the figures, they are too busy to prepare the figures in advance or are they really scared of submitting incorrect information to HMRC (Her Majesty Revenue and Customs)?
Over the years I have assisted many business owners to become comfortable with the figures; to gain a working knowledge of what the figures actually mean and to overcome that fear.
To engage with an accountant and/or a book-keeper is truly an investment to any business. At least they are qualified, can assist you to consolidate your accounts and submit them accordingly to HMRC rules and regulations.
I have identified a few areas that may assist you to grasp the financial side of the business, so as to focus on the business itself:
- Finding the money to start the business – consider savings, loans, credit unions, friends and family, overdraft facilities etc. Consider putting together a viable business plan and cash-flow forecast. Be sure that you have identified a market that is sustainable
- Do not understand the business side – You may have all the skills and experience within a given sector, but have no idea as to how to start and run a business. Consider attending courses, watch webinars and reading up in the areas where additional knowledge is required. Ensure that you gain a clear understanding of the various financial terminologies that are used.
- Not having enough money coming in; people not paying you on time? – having started the business you may realise that the income is not coming in as often as you thought it would. Ask yourself these questions;
- Did you conduct enough market research to gain a clear understanding of the market that you are targeting
- Did you have enough contracts or customers in place before staring the business?
- Did you complete a business plan and cash-flow forecast before starting your business?
- Did you have clear terms and conditions in place prior to trading?
- Paying yourself the right amount and paying the bills for the business on time – consider putting together a personal survival budget (PSB) that outlines your personal living expenses. This can be over a week or over a month. Ask yourself the question – do you have enough income coming in to cover your personal expenses? Then, within the cash-flow forecast, list all the business expenditure costs. Once this has been done, ask yourself this question – Do I have enough money coming in to cover my PSB and expenditure costs? If the answer to both questions is no, then you need to spend more time increasing your sales income.
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It may seem obvious, but do you know exactly how much money you need? Sit down and think it through. Consider every eventuality.