As a business owner, you can fall into the trap of spending time on the urgent, day to day issues at the expense of prioritising the important or more longer term problems.
Making sure that you have your finger on the pulse of your company’s financial health is vital.
Jonathan Moughton, Partner at Haines Watts Slough, highlights four areas that warrant particular attention:
1. Working capital cycle
Proper management of working capital is fundamental to your financial success. It is a key indicator of how efficiently your company is operating and how financially stable your business is in the short term.
Good working capital management helps you track whether you have sufficient cash flow to cover short term debts and expenses – and also indicates how well-run your business is.
Evidence of good practice in this area is particularly key when going for an additional round of funding or reporting to your bank.
2. Cash flow forecasting
Being able to predict, with some accuracy, the cash your business will require is essential, particularly in these uncertain times.
Accurate forecasting should enable you to plan to use any cash surpluses wisely and also alert you to potential risks on the horizon.
3. Interpreting financial ratios
Ratios provide a valuable tool for evaluating progress against internal goals. They also provide a measure to compare the performance of your business against competitors.
Financial ratios can be a powerful tool for identifying trends and safeguarding your business against market dynamics.
4. Planning financial growth
A financial growth plan is not a business plan though it can be just as important. It is a plan that works hand-in-hand with your business strategy, providing insight into how you expect your business to perform and where the financial risks may lie.
It documents the levels of funding you have access to and outlines plans for access to future funding.
While there is no doubt that having a sound understanding of and grip on the financials is essential, there comes a time when you may need an expert to take on responsibility for the finance function.
Talk to one of our accountants in Slough about your finances.
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