More people then ever are escaping the daily nine to five grind and starting up their own business. Whether it is turning a hobby into a career or putting years of experience to good use, setting up your own business is, for many people, a dream come true.
Yet business owners should not become complacent once they have overcome the initial start-up hurdles.
Simon Cowie, head of corporate services at accountant Hall Morrice says that ‘once a company is established, business owners often focus all of their efforts on the actual running of the business, paying little regard to the financial forecasting and planning that was made in the first stages’.
Business owners should regularly review their financial performance, by doing so they can ensure that the business is staying on track and following the plan they have set out. SmallBusiness.co.uk and Simon Cowie have this advice to consider as your business grows:
Making forecasts
Financial forecasts are a good indicator to business owners of how their funds will be distributed to cover the start-up costs for the business. This includes covering fees such as rent, rates, electricity, wages, stationery and any items that are necessary outgoings for the business that must be paid each month.
Reviewing your financial performance
Poor financial management can cause businesses to fail in their first year and, without close monitoring, costs can escalate. Setting clear budgets and forecasting the annual spend is crucial at any stage as this outlines the framework to ensure that the company is financially viable.
Using your projections as a basis, owners can begin to work out exactly how much money they need to have coming in to cover these costs and run a profitable organisation.
As you move forward, you can compare your predicted with your actual spending. If there are large differences you should review the financial forecast to re-distribute cash flow to allow for any issues that may arise.
Accounting systems
Reviewing your current accounting system can be a very useful exercise, as you can look at the system in relation to the overall working of the company. In some cases, if the system is not working as efficiently as it could be, it can be hard for business owners to keep track of how the company is performing.
Related: How to manage your accounts as a small business
Accurate financial reporting means that business owners can make informed business decisions about the future, as they have a good understanding of the company’s financial position.
