Financial planning

Size doesn’t matter
Regardless of the size or value of your business, the same rules apply. Trying to raise cash or attract investors when you desperately need it is always a bad idea. There are all sorts of implications such as; the valuation or your company which will show you are in trouble alongside the external perception of your management abilities. If you think you will need extra money for the business in the future, maybe you should think about securing the extra cash before you need it. This will avoid the risk of damaging your credit score if you can’t pay bills or worse still, not being able to stay afloat if the economy takes an unexpected nose dive.

DIY Finance
If you are also the person in charge of managing the finances this could be a part of the business that is always pushed to the bottom of your list of priorities. The ‘ostrich’ financial management approach is often the way that small businesses find themselves in hot water as those in charge will overlook the need for extra cash, simply by not being on top of things.

Be honest with yourself, can you really manage your business accounts yourself or should you enlist the help of an accountant to guide you through the process? If you’re spending endless hours trying to understand tax and accountancy whilst missing crucial deadlines, it would probably be more cost effective to pass it over to the experts. This will leave you more time to invest in developing the core business.

First things first
It may sound overly simplistic but you should diarise all tax payment deadlines, even if you have an accountant to manage this for you. This will ensure you have the cash ready for every payment avoiding interest penalties or, worse still, falling victim to a negative footprint on your credit record. You must also make sure you put aside an allocated percentage of your income each month to cover all these payments. If you manage your own tax affairs you should take advantage of the Revenue On-Line Service (ROS), it is an excellent facility and worth availing of.

Many a business has fallen foul of dipping into the tax money and not replenishing it in time. Your accountant will advise you on all Revenue requirements and deadlines. Visit the Revenue website for further information.

Clean credit is key to avoiding cash flow bottle-necks
When you invoice a customer and request payment within 30, 60, or 90 days, you are in effect offering an unsecured loan. The problem with unsecured loans is that they are of course unsecured. If the customer doesn’t have the money, there is no point taking legal action because it’s unlikely there will be any cash to recover.

Checking creditworthiness of both new customers and longstanding customers
You can run credit checks on your most important customers both before and after you acquire them. Don’t rely on assumptions and data which is more than a year old as a lot can change in that time period.

Overall, every business should protect its credit record like the crown jewels. As a business owner, you may not trust someone with a blemished record. Equally, if you take your eye off the ball, you may end up being the one that’s blemished and it could hinder future opportunities. Cash flow is King for Ireland’s 200,000 SMEs, just make sure you don’t fall victim due to another organisations’ bad management.

Source: Business Matters