business_linkThis article has appeared in the newsletter before - back in September 2008 when we were in the throws of the so called credit crunch. Speaking to a contact of mine recently, who is an insolvency practitioner, he told that his practice is expecting an increase in insolvencies this year. So now is a good time to remind ourselves of the importance of good financial management.

Any business adviser would be able to tell you numerous stories of seemingly successful business going bust or running into serious financial trouble. The order book can be healthy and the forecast for profitability good, but in the short-term the company simply runs out of cash, they find they can't pay the bills as they fall due and then the trouble starts.

Read more: Surviving Difficult Times

Looking For Finance Part 2

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Looking for finance part 2?

Last month I wrote about raising finance from your bank.


This month I will cover some government schemes aimed at helping you to raise finance and some alternative forms of finance.

If you are seeking bank funding but don't have the required security a government scheme called Enterprise Finance Guarantee (EFG) may be part of the answer.

At the discretion of the bank, through the EFG, security could be available on 75% of the loan at an additional cost of 2% on the loan interest. In effect the government is actually acting as guarantor for part of the loan. The EFG can be used for new loans, existing loans where refinancing is required and conversion of all or part of an overdraft into a longer term loan. Uses of the funding could be working capital or asset purchases. Go to our website for more information.

Read more: Looking For Finance Part 2

Looking For Finance

business_link Looking for finance?

A common question in my work is “where can I find the finance to help grow my business”, or in some cases to survive in the short-term.

There is a common misconception that banks are not lending to businesses at the moment, the reality is that they are but the criteria are much tougher than for many years.

Risk management is the key factor to remember here, whilst there are government schemes coming in or in place that are aimed at freeing up of bank credit for lending, the banks need to be convinced that they are not unduly risking scarce money by lending to your business.

Read more: Looking For Finance

Reviewing Your Profit Margin

business_linkThankfully I have a full order book at the moment, but my profit margin is low by comparison to similar companies; I daren't put my prices up so what can I do?

When you use the term profit margin I will assume that you are using gross profit to compare with your competitors.

There is a golden rule in business that not all customers are equal. That's not to say that you should bow or curtsy to some and kick others. The equality I am talking about is related to the contribution each makes your gross profit.

Read more: Reviewing Your Profit Margin

how to survive difficult times part 2?business_link

Last month we encouraged you to look again at your market strategy, this month the theme is more defensive concentrating on how to protect the sales and revenues that you have made.

Any business advisers would be able to tell you numerous stories of seemingly successful business going bust or running into serious financial trouble. The order book can be healthy and the forecast for profitability good, but in the short-term the company runs out of cash, find they can't pay the bills as they fall due and then the trouble starts.

Read more: How to survive difficult times part 2

Business Budget

What is a budget, why should I bother?business_link

My accountant and my bank manager have suggested that I should have a budget for my business. I am not sure in practical terms what this means, but it does sound like more useless paperwork. So tell me please, what is a budget and why should I bother - I always end up making a profit and my accounts go in on time?

Last month we looked at what budgeting is and some of the terminology used. This month we will look at the rules for putting together a simple cash budget, some thoughts on extracting the important things to review regularly and then look at what to do once you have reviewed them.

Discuss what would be the best budget format for your business with your accountant or business adviser. In the meantime what follows will hopefully help and encourage you to set up a basic budget and financial management process to get you started.
Although the table below is simplified for this article, the principles and the rules are the same as those for more detailed budget formats.

Read more: Business Budget

What is a budget, why should I bother?

My accountant and my bank manager have suggested that I should have a budget for my business. I am not sure in practical terms what this means, but it does sound like more useless paperwork. So tell me please, what is a budget and why should I bother - I always end up making a profit and my accounts go in on time?

Firstly the fact that your accounts are produced at the end of the financial year has no bearing on this. The final accounts are a record of past achievement and are too historical to use to control the business. That the business “ends up making a profit” is good news, but profitable businesses fail all of the time - often when sales are increasing - because they run out of money to pay what they owe. This is often avoidable through good financial planning & control; having a budget is central to this.
Not that fear of failure should be the main motivation for having a financial plan, you should develop a financial planning and control process in order to grow the business and achieve your goals.

Read more: What is a Budget?

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