How To Manage Your Own Business Finances

Business Finances

Last year, 526,446 new businesses were registered in the UK, as more and more people looked to start their own ventures. However, as anyone who has done it will know, setting up a business is no picnic. One of the most common bugbears is managing finances. Whether it’s keeping on top of invoices or managing cash flow – it’s not why many people decide to start their own businesses, and can be a time-consuming, challenging and uncertain exercise. However, increasing familiarity with technology is helping businesses to manage their finances in a more productive and efficient way.

What are the most common accounting pains? Every business can struggle with certain financial tasks, but for many startups the following are often the biggest challenges:

Getting Paid & Monitoring Cash Flow

When you first start out, getting paid on time is absolutely crucial in order to keep the business afloat. According to a study we carried out, the main reason for business failure is poor financial management – 44 per cent had either run out of cash or come very close within the first three years.

Managing cash flow in particular was found to be a major stumbling block. However, the cash flow statement is critical in order to survive. It shows how much cash you have available at any given time. It’s generally advisable to monitor cash flow on a weekly basis in order to identify potential shortfalls early and arrange credit if required.

Businesses tend to manage who owes what via paper-based records or Microsoft Excel spreadsheets. While this may be sufficient in the first few months of trading, it can quickly spiral out of control and become a massive challenge to keep on top of. It can also be time consuming to sift through endless spreadsheets and documents to find what you need.

Creating Invoices & Managing Unpaid Invoices

Creating and sending invoices is arguably one of the most important jobs in your business. The longer it takes you to send an invoice then the longer it takes to get paid — so prompt, accurate invoicing can improve your cash flow. It is also important to make sure they are presented in a clear and professional format. Many new businesses can struggle with this, often relying on Microsoft Word or Open Office templates.

However, using this approach to create new documents can be time consuming and human error mistakes such as forgetting to change the date can also be common. Given that customers and suppliers will be sent these documents, it’s imperative to pay attention to detail and project a professional image.

Balancing Profit & Loss

Having a clear overview on profit and loss is integral to the smooth running of a business. This process requires a good understanding of finance and accounting, which many start-ups and entrepreneurs can lack. What’s more, it seems that many are reluctant to turn to experts to help with this. In our own study last year, we found that just 10% of SMEs in the UK are using accountants as their primary method for tracking incoming expenses and spreadsheets are the go-to solution used by around one third of businesses .

Given that the profit and loss statement is used for making business decisions, it needs to be carefully compiled and updated and reviewed on a weekly or monthly basis, depending on the size and type of business. Typically, this is done via paper-based records, but these are difficult to manage and take time to update. What’s more, for those business owners that lack a strong financial background, there can often be inaccuracies or mistakes. This is a great risk which can in the worst case lead to business failure.

Taking Control Using The Cloud

So how can small businesses avoid these pain points, and make their accounting less of a headache? One of the key trends amongst small businesses is to move away from using spreadsheets and documents and start using cloud-based financial management software. In fact, the International Data Association believes that 50% of SMEs will be using cloud accounting by 2016 . There is a range of cloud-based technology now available, which can benefit businesses in a number of ways.

You can access cash flow and profit and loss statements via the cloud instantly, which saves time searching through numerous documents. You can even do this from mobile devices, so you can get a complete overview of your finances at a touch of a button, whether you’re travelling to a meeting or picking the children up from school. The set-up of the documents is also very easy. You can use templates to input all the information, which is then automatically updated when changes are made eliminating human error mistakes and inaccuracies.

When it comes to invoicing, new documents can be automatically generated using information already saved about customers, products and prices. It is also possible to send invoices by email so your customers receive them quickly. Such a streamlined process not only helps save time and improve accuracy, but also projects a professional image.

The Importance Of Accounting

When you start your business you are often juggling multiple things; managing the finances is just one of them. While it is often far from enjoyable, getting it right is critical. From managing cash flow to invoicing, you can now self-manage your accounts much more easily with the right technology. It frees up time often spent on finance admin and allows you to concentrate on more strategic tasks and developing innovative ideas. All this helps to remove the pain around financial management and simplify your business processes.

As VP and UK Country Manager at Intuit, Rich Preece is focused on increasing QuickBooks' customer base in the UK by helping SMBs and accounting professionals move to the cloud to manage their finances more simply and effectively with QuickBooks Online. Prior to his current role he was Director of Intuit’s Partnership Solutions Group, specialising in identifying and integrating third party solutions within the QuickBooks ecosystem, to help simplify customers’ lives so they can grow their entire business on one platform. Rich recently returned to the UK with his family having spent 16 years in the US, the last 12 of which were with Intuit. He also currently sits on the board of the European App Developers Alliance. Rich holds a Bachelor of Science in Marketing from Bournemouth University.