There are 5.5 million small-to-medium enterprises in the UK at last count – and yours counts amongst them. All of these businesses have a great deal in common, not in the least the exposure to potential hardship in the face of an unprecedented national economic crisis. Managing money for newer businesses can be difficult at the best of times, but what are some key tips your business could follow to weather the storm?
Budget, Budget, Budget
Every business has a budget. Whether comprehensively calculated or drawn out on the back of a napkin, the very existence of your business is with thanks to some essential calculations you have made about the funding available to you and the costs associated with starting. The key is not to treat this initial budget as finished, or as the only budget you will need.
Your business may be ticking along fine without a fastidious approach to logging expenditure, but failure to do so can work against you – particularly when it comes to existing or future investors. One of the most important variables for a growing start-up is cashflow, or the simple equation of money against money out. This does not equate to profits, and expenditure on assets and infrastructure can count against you. Negative cashflow, or the shrinkage of your cash holdings, can cause concern amongst others, and even signal an unhealthy business.
Know When to Borrow
Even though cashflow is king, and particularly so in times of recession or near-recession, this does not mean that borrowing is not your business’ friend. There are a great many instances in which small business loans can be highly practicable for advancing your business’ interests, and for improving your financial situation in the process.
For one, taking out a loan can in fact be useful for your cashflow in the extreme short term. You are injecting immediately-available money into your business, which you can use to positive effect in your cashflow reporting. Even if cashflow reporting isn’t a significant concern for you at present, you can use this money to make strong short-term investments and improve your position – provided, of course, you know your business will be in a strong position to repay the debt. Speaking of which…
Forecast, Forecast, Forecast
So far, we have only addressed ideas that tackle the immediate present for your business. Even if a good budget can help pave the way to strong financial future, it represents decisions that you make in the present and on an ongoing basis. This can be an easy trap for stagnation; you need to be thinking longer-term, thinking in terms of growth, and thinking with empirical data as your guide.
Forecasting the future performance of your business enables you to make shrewder financial decisions towards better growth or more stability. Measuring your past and current performance, and using market data to extrapolate ahead, puts you in a strong position to apply for more seed funding or to make preparations for harder times. This sneak peek into the future can be key to guaranteeing your business’ financial health.
