Are you struggling to keep up with the finance? The constant treadmill of managing the cashflow; raising invoices, chasing invoice payments, paying suppliers on time - it's time consuming!
For this instalment of managing your Functional Business Plan we're going to delve into the administrative tasks needed to manage the finance part of business and explain the importance of keeping your finger on the cashflow pulse.
Earlier in this series we looked into accounting but surely accounting and finance are the same thing, aren't they? Well no, not really. Accounting focuses on the financial transactions of the business and keeping records of those transactions. Finance for your business is about understanding your cashflow, budgeting and forecasts. To be able to manage these, you need to know where your cash is coming from and how much money you have available.
When you started your business, you may have had your own money to put forward as capital or you may have raised capital through one of these:
Financial forecasting is essential for your business and managing the cashflow. To successfully manage your cashflow, you will need to know how much cash you have coming in to the business through funding and revenue in order to make sure you have enough to cover the business expenditure for:
repayment of loans
payment of dividends (if you have shareholders)
day to day expenses - and then still make a profit.
It is worth remembering that even a company in profit can fail if the cashflow is interrupted.
So, where does administration sit amongst all of this. Consider how much time it takes you to do the following:
If you don’t raise an invoice, you won’t get paid. Invoicing should not be seen as a back-office
administrative nuisance. Rather, it is a vital first-step in achieving healthy cashflow.
Raising a further invoice for interest and late payment charges is an excellent way of gaining your customer’s attention and raising the profile of your outstanding invoices.
Paying your bills!:
Cashflow keeps business in business and if you don’t pay your suppliers on time you risk
damaging their business or – worse – causing, or contributing to, their failure. You want your invoices paid on time, and you should do the same.
Records system management:
When you get paid, the sale is complete. When a customer doesn’t pay, they’re hanging on to money that is rightfully yours and you should ask for it. You should have a routine system for following up non-payment that includes letter, email, and telephone.
Bad debts damage your business but there could be a simple explanation for that unpaid invoice - do you need an extra pair of hands to check and double-check the details? How do you manage the credit period?
You wants to provide your customers with quality and value. Finding the right product at the right price from a reliable source can take a lot of valuable time in research, calls and emails.
By outsourcing these tasks to a Virtual Assistant (VA) you could save so much time and money. As a VA, I run my own business and therefore understand how a business should work. My business is to provide you with solutions to common business problems, leaving you free to do what you do best! Get in touchif you would like more information.
To help you further with managing your business finance, I've included some useful links here to the HMRC website: