Looking after your finances

Help with banking, cash-flow and keeping accounts.

Money can be tight during the initial months, and even years, of a fledgling business, so it is important that you stay firmly on-top of your finances.

Choosing the right bank, keeping good accounts and managing your cashflow are all essential if your business is going to succeed. We tell you how to take control of your finances.

Banking

Keeping your business banking separate from your personal account means it will be far easier for you to manage cashflow, as well as work out your tax liability at the end of the year. To do this you should think about opening a business account. At their simplest, business accounts simply offer a cheque and paying-in book - this could be best for you is you're starting small. However you can get lots of extras including overdraft facilities and fee-free transactions - just shop around as banks often charge for these extras and you don't want to pay for things that you don't need.

Business banking

Here’s some well-known names for you to have a look at:

Money Supermarket
Lloyds Bank
Barclays Bank
Royal Bank of Scotland
Natwest
HSBC
Santander

Keeping Accounts

Keeping a close eye on all your financial incomings and outgoings, however small, is really important to make sure that you account for everything and don’t get any surprises at the end of the year. As a business owner you will be liable to pay VAT and tax so you need to make sure you can account for all your financial transactions with receipts and paperwork. 

Make sure you find a safe place and keep all the related documents relating to your business including:

  • Expenses and receipts
  • Outstanding costs and debts
  • Copies of invoices
  • Cheque stubs
  • Bank statements.
70%

of small firms experienced late payment in the last 12 months.

CashFlow

Cash flow is basically money coming in and out of your business, if you are spending too much and your customers aren’t paying you on time you will end up with a problem. Listed below are our top ten tips for managing your cash flow, we also recommend you take financial advice from a professional such as an accountant or friends and family who have their own business.

  • 1Check regularly

    Regularly check your cash flow forecast – what do you need to spend and who owes you money?

  • 2Get your invoices out

    Sending out invoices isn’t the most exciting job in the world, but without them you won’t get paid.  Set time aside at least once per week to send out all invoices.  Make sure your payment terms are clear (e.g. 14 days) and chase any late payments.  

  • 3Try to solve problems

    If one of your regular customers always pays on time but is late with their most recent payment – they might be in financial difficulty, make sure you check this with them.  You may be able to come to some sort of agreement to ensure you get paid.

  • 4Don't over buy

    Don’t buy too much stock, stock sitting in your garage isn’t making you money!

  • 5Be sensible

    Cut back on pointless spending and costs. For example, arrange meetings during the morning or afternoon and avoid lunch times, that way you won’t end up paying for lunch!

  • 6Treat your bank as a friend

    Your bank manager is your friend! Stay on good terms in case you need to extend credit levels or apply for finance.

  • 7REward early payers

    You can create a short term cash boost by offering special offers to those paying early e.g. 10% off your next purchase if you pay before a set date. (keep these offers to a minimum).

  • 8Lease vs purchase

    Instead of buying that perfect mixer for your catering business, could you lease one or spread the cost somehow?  The money is better in your account!  Consider all funding options.

  • 9Investigate the best way to pay

    How do you pay your suppliers?  They may allow you to spread the cost with instalments or allow you a little extra time to pay a bill.  Remember they can only say ‘no’ if you ask them, they would rather you be honest and ask than be late with a payment!

  • 10Set alerts

    Have a warning system in place so if you are heading towards the red, you know as soon as possible. For example once your business account gets to a balance of £500 you need to look into cash flow to make adjustments (this will be different for every business and you should consult your accountant or bank manager for advice).