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29 February 2016
Business Growth


The essential guide to Starting Up & Growing your Business

Barrier 7 – Managing the Money

As a Business Owner are you confident that your company is on solid foundations financially?  We all read about how the lack of financial strategy and poor control leads to the downfall of many small businesses, but how well are we really managing our budgets?

My previous article The Wrong Objectives highlighted that Turnover is Vanity, Profit is Sanity, and Cash is Reality; yet 50% of small firms have no financial budgeting process or sufficient controls to ensure a secure level of liquidity.  In this final article of my series Conquering Barriers to Business Growth, we focus on Managing the Money to ensure your business flourishes.


Financial Fundamentals

To avoid problems all together there are a few basics you must set up right from the start, to give you the tools and information you need to keep on the straight and narrow.

1. Start Up Costs

Your business plan should outline what your start up costs will be.  If you’re selling a product you’ll need to plan how much stock to have sitting on the shelf as you grow your sales.  It’s a fine balance between not running out, but being flexible enough to start using the profit margins yielded from your first sales to plough back into producing more stock, and still having some reserve to operate with.

Providing a service may have less start up costs, but will still have operating costs and have to be advertised and marketed so don’t be complacent when it comes to forecasting your expenditure against your likely income.

Set up a simple spreadsheet showing your expected sales income in the first year – and be realistic or even use worse case scenario – against the costs of sales in the same time period, to visualize exactly how your cash flow will look.  Make sure you know where the cash may start to run out and adapt your forecast accordingly by reducing unnecessary cost before you get into a crisis.

2. Business Banking

Apart from talking with your Business Bank Manager to determine how much they can help you in your start up phase, make sure you get the best business account you can, at the lowest possible cost.  I got 18 months free banking with mine, but check what the costs revert to once you’re out of that period.  The charges normally relate to the number of transactions you likely to have in both deposits and withdrawals etc.

Your business bank account should provide a reasonable overdraft facility, which is good for the day-to-day expenses and frees up cash flow, but is a very expensive way to fund longer term financing.

Most importantly, the success of your business could depend on the relationship you have with your bank, so it’s important to manage the account properly, staying in credit and sticking to the terms and conditions you’ve agreed to.

3. Record Keeping

Yes, this is the dreaded A for Admin!  We all hate it and don’t think it’s important.  Legally, however, there are certain records you must keep, and at the very least you’re going to have to keep basic financial information for tax and VAT returns.

To avoid running into problems you’ll need to be disciplined and put a regular date in your diary, even if its just half an hour a week to keep on top of this – get your system in place, no matter how simple and STICK TO IT!  Here’s a quick outline of which records to keep, where and when.

What Where When
Sales Records or Client Invoices Sales Ledger Daily, minimum Weekly
Payments Received Sales Ledger, Cash Flow Daily, minimum Weekly
Business Purchases Purchase Ledger Daily, minimum Weekly
Payments Made Purchase Ledger, Cash Flow sheet Daily, minimum Weekly
Reconcile Sales & Purchase Ledgers Sale & Purchase Ledgers Monthly
Chase Debtors (outstanding payments) Refer to the Sales Ledger Immediately when overdue
Reconcile Bank Accounts Bank Reconciliation Sheet Each bank statement received

4.  Profit Margin

This isn’t just something your accountant produces at the end of your financial year, but should be the driving force that you manage your business on.  Again, a simple spreadsheet will suffice showing your business transactions of sales turnover or income, and deducting your expenditure so you can see the “bottom line” figure even if it’s not exact.  Keeping your finger on the profitability pulse is the only way to avoid hitting a growth barrier.


Avoid a Cash Crisis 

Running out of cash is the most common reason why businesses fail in their start up or early growth phases.  One key piece of advice is not to wait until you’re desperate to seek funds.  In the early months or years it’s much easier to raise money when your business is showing positive growth and a healthy cash flow that will encourage investors, rather than wait until you’re in real problems to seek financing, when people will be put off investing in a failing business.



The Government and Local Authorities have been actively providing subsidies and grants to start up businesses for over a decade now, so check out the options that are available to you.  George Osborne closed the Business Growth Service in his last mini-budget, but there is a new initiative of local Growth Hubs.  The Growth Hubs have been formed as “one stop shops” to assist you through the minefield of information that previously put a lot of small business owners off trying to source funding.  Their mission is to do all the research for you; trawling, searching and consolidating possible options, so you can save time and be pointed directly towards any grants, funding or subsidies that might fit your needs.

This ends the series in Conquering Barriers to Business Growth.  I hope it has proven useful to those of you following the weekly articles, and even if you only apply some of the techniques and suggestions provided over the last 7 weeks, you should see your business bloom – just in time for Spring!!

Next Week

The National Living Wage will be introduced on the 1st April 2016.  Is your business ready, and have you crunched the numbers to see how this will affect your bottom line?  Some thought provoking insight into the impact the National Living Wage could have on your business, and what to think about to prepare the way, and reduce the consequences on your profits.


Alluxi is here to offer you support through these times of change, bringing a facts and figures approach to evolve your business and realise your goals.

As a first step towards identifying your current business challenges and evaluating where your future opportunities exist within your business, we invite you to complete the in-depth Alluxi Business Success Scorecard delving into the 10 key critical success areas.

Take 15 minutes to respond to the scorecard and get your results within minutes.  You’ll have the opportunity to book a follow-up Productivity to Profit Breakthrough Session to find out how you can implement rapid and measurable improvements.