Business Start Up Guide To Finance

When you first start out in business, there will be lots of costs involved. Many of these you will have thought of in advance, a lot more you probably won’t have. You will also probably find it will take you a while before the cash starts coming in.

"Turnover Is Vanity, Profit Is Sanity, Cash Is Reality"

It's an old saying, but one worth thinking about. Essentially, it's no good selling if you're not making a profit, and even with a profitable business, you can still go bust if your customers pay you slower than you pay your suppliers.

Cash flow is vital. Consider credit terms on things you buy and sell. Can you get people to pay up front, or perhaps via standing order/direct debit? Without funds coming into your business, you will get nowhere.

The Early Days Of Trading

You're unlikely to have an inflow of cash on day 1. If you're quitting a job, make sure you have a reasonable amount of money available to get you through those tough first few months. If you have enough money to pay all your bills for 6 months, this should be plenty to keep you going. If not, consider taking a part time job to begin with whilst you build the business up on the side.

It can be tough at the beginning knowing how much to spend, and what to spend it on. Spend too much and you'll quickly run out of cash and may go out of business. Spend too little, and unless you're very careful, your business may appear "cheap", which could put off potential customers.

Your Bank

It may be worth having a talk to your bank. You may want to open a business bank account to keep your business transactions separate, and help you appear more official to your clients, and to help you keep track of where your money's going.

You may also wish to discuss a loan to get you started. In these tough times that is not always an option, and you would need to have a decent business plan prepared before even asking.

Keeping Track Of It All

Consider how you are going to keep track of income and expenditure, receipts and payments. It may be worth getting a bookkeeper involved from day 1, as although this will be an additional expense, it will take a big burden off you. A good bookkeeper will ensure your records are kept in order, and in turn should provide you with quality figures to assess how well you’re doing and where you need to make cutbacks/improve.

Even if you think you understand what you're doing, you should speak to a qualified accountant as well. Your accountant and bookkeeper can be the same firm, which may be more expensive, but may also make your life easier.