This is the new acronym for this post…
Finance that is the lifeblood of any business. We go into business to increase our share of it. We interact with other businesses using it as a means to being paid. We use it to pay our staff and any sub-contractors we hire. We use projections to get funding from different sources so that we can grow our businesses. Like it or not as business owners we need to have a basic understanding of our finances. Leaving it to the accountant in this day and age is silly, by all means get them to do your accounts, just make sure you know what it is they are doing for you.
Investment. There are two types of investment I’m going to concentrate on. The type where you get financial backing from an investor in return you give them a share in your business so that you can grow it faster. This can be a good thing, after all a percentage of a profitable growing business is better than one hundred percent of a stagnant non-developing company any day of the week. The other type of investment is the time and energy you put into growing your business. Do you invest your time wisely or do you stretch yourself so thin that you are constantly playing catch-up on different sections of your business?
Non payment. This is every business owner’s nightmare and at some point we will all go through it. I learnt this lesson the hard way over ten years ago when I was involved in party plan with a friend. She delivered the goods to the hostess who only gave her some of the monies due and gave a sob-story about two of the non-payers. My partner handed the goods over because she was assured that the money would be forthcoming the following day and she felt bad not doing so. Needless to say it never was forthcoming. Business is business, it is completely emotionless, however the people running businesses are not and can get sucked into many hard-luck stories. While I can sympathise with anyone I’m not a charity and don’t intend to become one either. There is a fine line to be walked between sympathising with another and being sucked into their financial woes.
Accounts. Some people love them; others just don’t seem to be able to get their head around them. They are however, an essential part of any business. It is the day to day accounting that will show you how you are doing in your business. It will also give up so many reports that can show progress made or not as the case may be. There are so many usable features in today’s accounting packages and most of them are really easy to use once you get the hang of them.
Notifications. As a business owner you – or someone you employ should be keeping track of all your payments, both inwards and outwards. There should be system in place to notify that person when a payment inwards is due so that the appropriate call is made to that debtor to ensure that the payment is made on time. Too many businesses in Ireland seem to take the attitude of “sure wait till they ring and ask for it and tell them we didn’t get the invoice” and then will state that they pay thirty or sixty days after receipt of said invoice. Have your terms and conditions printed on your invoice to avoid such incidents.
Cash flow. Without it so many businesses have faded in the last couple of years. The businesses that are doing well can either manage their cash flow effectively or operate a cash-only system. Some are managing to secure bank funding. They are managing this because they have a sound business idea and have shown how they will control how their cash flow works. Remember if you work on a credit basis you are funding your customer’s cash flow. Have strict controls in place and don’t deviate from them.
Emergency measures. I’ve a friend who at her wedding reception was advised by a grand-aunt of hers to “have your running away money in a place that nobody else knows about and don’t use it for anything else”. At the time I was shocked at the advice. Years later that friend is still happily married and her reserve fund – as she calls it is still building up month by month. Every business needs a reserve fund of some kind, be it a savings plan that rarely gets used, or a loan source that is available in a hurry. Before the Celtic tiger I knew of many businesses that had them in place, now I don’t hear of them as much.
I’m sure that there are other things that people consider important to the financial side if business that I’ve not included and I’d love to hear them.