How to Manage Your Business’ Finances – Mastering the Basics

Ellie Green
Authored by Ellie Green
Posted: Sunday, June 30, 2024 - 21:36

Starting a business in 2024 – after a slew of economic crises and after a historically-important election – can be a worrisome decision. Even if this is a relatively calm environment in which to start a company, there are still a great many unknowns to manage; essential business management tactics shouldn’t rank amongst them, and especially not the business of finances.

The Importance of Bookkeeping

Accountancy and bookkeeping describe the managing of a business’ financial dealings, both internally and externally. A business must meet its tax obligations readily, and must pay its employees legally – both basic necessities, but ones which require knowledge and which exact heavy costs if not managed properly. Accountancy isn’t just about protecting a business’ legality though; it is also about protecting its success.

It is for these reasons that soliciting the services of professional accountants, even if as a third party to a relatively lean operation. Without the right hands on deck for managing your books, your business could find itself in difficult legal territory – to say nothing of the financial difficulties that can arise from poor financial decision-making.

Budgeting Strategy

This is also why it is crucial that you have a proper understanding of budgeting from a business perspective. Personal financial literacy will go some way to guiding the business finance novice, but the truth of the matter is that business budgeting is much more complex than simply balancing your current account.

For starters, thinking about business growth means thinking about investment – and reckoning with the private-sector truth that debt can be a good thing. Businesses are always leveraging debt in order to acquire new debt, all in service of investment, expansion and enrichment. Budgeting for your business’ growth requires working within some strictures, but with a different understanding of good and bad expenditure altogether.

Finding Investors

This leads us, naturally, to the topic of investment – and how you can encourage it as a business. Money for investment needs to come from somewhere, after all.  Much of a business’ early-days growth can be funded with money scraped together from savings and bank loans, but the big investment money comes from venture capitalists or angel investors, who can also use their industry knowledge to expand your business opportunities.

This was previously an extremely London-centric affair, but as northern cities like Liverpool continue to successfully rally against the unfair stratification of the UK by region, they have become hotbeds for investment activity all of their own.

Cash(flow) is King

Finally, a brief primer on cashflow and just how crucial it is to running a business. Cashflow is, in short, the money that enters and exits a business. It is not profits and losses, but a stark, objective look at the money received and money spent or lent out. Negative cashflow means more money left than arrived, and a pattern of negative cashflow (even if money is being invested in growth) can spook investors. So, outside of those first two years of establishment, try to think carefully about cashflow in order to stay in the good books.

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