Ask most successful entrepreneurs and they will relate exactly the same thing: running your business can be hell at times (it requires a lot of work and you have to be able to tolerate uncertainty), but it’s incredibly rewarding. Starting up your own enterprise is not for the weak at heart, after all. Proof: only about 1 in 10 businesses make it through the first year.
On the other hand, anyone can start a business – it’s all about mindset. It’s about making sure that you have all priorities sorted out properly, and that you are willing to do the work until it’s done. Are you thinking about a new enterprise, or just starting one? Do you have a new business? Here’s how to manage your finances more effectively.
Your cash flow
You should be able to make a plan for your expenses and income for the next 12 months. That’s not to say that things are always going to go according to plan, but it does give you a way of gauging the performance of yourself and your staff; it gives you a measuring stick by which to make adjustments and recognise potential problems. Incorporate seasonal fluctuations, and keep accurate track.
Once you’ve received an invoice, take careful note of when it is due, and include it in your planning. Similarly, once you’ve written an invoice, list down when you can expect payments. Be careful of the latter, however – not all customers pay on time, so be prepared to act on plan B in case of late receipt. By forecasting you should be able to plan better, but be conservative in your forecasting.
Don’t forget VAT
Once you’ve reached a certain turnover, you will be obliged to register for VAT. It’s often wise to do this in advance, in case your turnover suddenly increases.
It’s paperwork, and often time-consuming; but doing it immediately will allow you to focus on other important things much sooner, and your forecasting and planning will have a much more solid base, as the accountants central London from GSM & Co. will tell you.
Have a money-pot stored
It’s possible (even likely) you will need a cash flow boost in the future, so be prepared – set money aside, or know which friendly lenders are willing to grant a loan. Credit is good but should be used wisely.
Above all, as much as possible, keep things simple. Nobody has ever benefited from a complicated business model. There will always be problems here and there – and you should learn how to navigate them – but if you feel it’s getting out of hand, it’s often better to trim the tree so it can grow better next season. Keep it simple, and enjoy the process.