Blue Fusion Blog
Thoughts, advice and opinion.
Thoughts, advice and opinion.
There’s so much to think about when starting a new business and many entrepreneurs simply put off opening a separate business bank account until later. If you’re a sole trader, legally you don’t have to separate your personal and business finances, but it’s definitely sensible to do so. Yes, keeping track of multiple accounts may seem like extra work but in the long term keeping your personal and business finances separate will make it a lot easier to manage your money.
If you use the same bank account for personal and business expenses, you’re guaranteed to find yourself with a headache when tax season rolls around. It can take hours to go back over your accounts and try to remember which transactions were business-related. It’s also a lot easier to make mistakes, which can come back to bite you later on in the form of a fine or an audit. Separating your personal and business finances renders tax season much more straightforward.
In addition to this, mixing your personal and business finances makes you more likely to create inaccurate cash flow projections or miscalculate your profits. This can then result in overspending or a skewed view of your growth. These mistakes compound over time and your murky records may land you in hot water.
In order to create a successful business, you need to treat it like a business from day one. Keeping your business and personal finances separate goes a long way in helping you to do this. It creates a sense of professionalism and helps you to actually feel like a serious business owner. Furthermore, clients will take you more seriously when they make payments to your company bank account.
Having a separate business account makes it much easier to secure finance for your business. When attempting to obtain business credit, any lender will require evidence that your enterprise is financially healthy and that you manage your money well. If your statements show a confusing combination of business and personal transactions, you’re unlikely to be taken seriously.
Furthermore, mixing your personal and business finances can negatively affect your credit score which may prevent you from obtaining both personal and business credit in the future. It’s much more prudent to separate your finances early on so that you don’t end up in hot water and can maintain a safety net.
An audit may be the furthest thing from your mind right now, but in the future you may face one and it’s vital that you’re prepared to do so. When your business undergoes an audit, it’s crucial that you provide accurate, easy-to-follow financial records that demonstrate that you are an honest and law-abiding organisation. If your records are confusing, you’ll have to endure a barrage of admin and office visits in order to set them straight, and you may face a hefty fine.
Cybercrime soared during the covid-19 pandemic and online fraud is something you should take seriously as a business owner. Of course, having your bank account breached is always bad news but if you use a single account to manage your personal and business finances, you’ll essentially be hit twice. Separating your personal and business finances offers more of a safety net against cybercrime and may allow you to continue operating even if one of your accounts does fall prey to fraud.
Separating your personal and business finances is an essential step in ensuring the financial health of your business. Not only does maintaining separate accounts render it far easier to keep accurate records, it can also help you to grow your business by securing credit and creating a sense of professionalism that puts you in the right mindset for success. It’s a worthwhile step for any new business owner to take, and when tax season rolls around, you’ll be very glad that you did.
Cash is king in business and good cash flow management is essential for the success of your start-up. Think of cash flow as blood flow and you’ll understand just how vital it is to the health of your business; without it, you’ll die. That sounds bleak, but it really is important to manage your cash flow well from the very beginning and protect your business against any problems along the way.
Even if your business is very profitable, you’ll struggle to cover your costs without sufficient funds available. However, at the same time, an excess of cash suggests that you’re not re-investing enough into scaling your business. Finding a balance takes accuracy and attention, but it can be done by following the steps outlined below.
Before you can start planning for the future you need to get a clear picture of where you are right now. This is where cash flow statements come in. A cash flow statement provides an overview of how much cash is coming in and going out of your business. This then allows you to perform a detailed analysis of the financial health of your business.
A cash flow statement requires a lot of data and so a cash flow calculator can be very useful in helping you prepare this document. You also might want to think about hiring an accountant to ensure that your statement is accurate, since getting this wrong can lead to bigger mistakes down the line.
It’s important to understand what your cash flow is likely to look like in the months to come so that you can plan ahead and manage your finances wisely. Realistic cash flow projections can help you to invest your money at the right moment and account for any potential pitfalls along the way. This process can be time-consuming and complex, so again it’s worth using accounting software or enlisting the help of a professional. These projections are incredibly valuable when it comes to scaling up your business and so they’re worth investing in.
Any entrepreneur will tell you that it pays to have a safety net, particularly when you’re scaling your business. Investing in growth can lead to short-term negative cash flow which is perfectly okay, so long as you’re prepared for it. A cash reserve will help to smooth things over when you’re having cash flow problems and ensure that you have enough funds available in order to pay suppliers and staff. It’s also worth investigating whether a credit card or line of credit could be beneficial to your start-up to help you keep operations going when cash runs dry.
As important as it is to have a handle on where you are right now, your business won’t be this way forever. After all, the ultimate goal is to grow out of the start-up stage – and this means big financial changes. Furthermore, there are many factors outside of your control that could affect your cash flow in the future, such as inflation, recession or late payments from clients. It’s always best to be prepared for the worst so that your business is protected against any eventuality. Take some time to research and forecast potential changes in market conditions that could impact you in the future. Again, it’s worth consulting your accountant for advice that could help to protect your business.
It’s important to manage cash inflow effectively and sadly, you can’t just bank on customers always paying you on time. You need to ensure that you send invoices in a timely manner, set clear payment deadlines, send reminders and chase up late payments. If you have a large customer base, this can be a time consuming process and it may be worth looking into accounting or invoicing software to take care of this for you. Not only does this help you to manage cash inflow accurately, it also frees up your time for more valuable pursuits.
There’s a lot to think about as an entrepreneur but managing your cash flow well is one of the most important ways of ensuring the financial health of your business. Not only does this help you to protect your start-up against market changes and late payments, it enables you to invest your money wisely and at the right moment. Good cash flow management isn’t just about protecting your business from collapse, it’s also vital to help your start-up to grow and flourish.
Starting a new business takes vision, determination, and, most importantly, funding. The financial side of things can be the biggest hurdle for many new entrepreneurs as the initial challenge might seem overwhelming.
Yet, there are many available options for procuring the necessary funds that will get your start-up going.
The most important thing when considering financial support is to not expect a solution through some magic wand. Your idea might be exciting and fresh, but that doesn’t mean investors will be waiting in line to provide you with the money.
Securing the needed funds for your start-up will require serious, careful consideration. Have a look at the possible options and decide on one or more that are most available and most attractive to your start-up.
It’s quite common for people launching a start-up to borrow the initial financing required from friends or family. In fact, almost 40% of new entrepreneurs get their ideas off the ground this way, and there are good reasons for it.
People close to you may be more likely to accept the investment risk and they’ll be less likely to pressure you when it comes to showing results and paying off the debt. This usually won’t be the case with other investors.
If borrowing from friends or family isn’t a viable option, government grants could be the next best thing.
There are plenty of cases where governments offer support for new businesses, as the attendant economic growth is in the government’s best interest. This is especially true for younger entrepreneurs and technology start-ups.
Another option is to apply for a start-up loan at a bank. But keep in mind that banks are cautious with business loan applications and they will likely require you to have existing assets and good credit history before considering your application.
As an alternative to bank loans, there are lending companies that will be more forgiving about the whole deal. However, this should be the absolute last option as some alternative lenders can be predatory.
What sounds like the least tempting option might also be the most realistic way to fund your start-up.
If there are no other options to find funding, the best investor for a start-up will be the very person launching it.
This is a challenging method that will require you to pay for the start-up yourself, which is what bootstrapping means. It entails working on the project in your spare time or saving money from your salary until you’re ready to cover the initial expenses.
The good side of this approach is that you’re not relying on anyone else but yourself – there are no debts or pressure.
It’s a low-risk, high-effort situation and many successful businesses were initially funded using this method.
Securing funds for a start-up can be stressful and require a lot of work. However, there are several ways to find funding and start bringing your idea to life.
With careful consideration and the necessary dedication, you’ll be on the right path to making your dream a reality.
There’s much to learn about building a business from the ground up and turning it into a success. Some things you pick up along the way, others you have to know before getting started.
That said, it will be much easier to succeed if you remember a few key things.
Operating in a service-based niche means that your business will depend on your clients. But it’s not all about quantity – it’s also about quality.
Before coming up with a business plan, it’s important to figure out your market and audience. So it’s critical that you understand your skills, what you can do, and who you can help.
The better the clients, the easier and more exciting the work.
Those that start a business without a good business plan often fail. Their ventures die or never reach full potential.
One of the best ways to avoid that is to create a solid business plan.
A business plan presents a detailed overview of everything you need to know. It outlines costs, goals, scaling potential, client demographics, and much more.
On top of that, it’s essential to have a business plan if you want to get funding for your startup.
Some people are under the assumption that clients will come running to them. But the fact is that to run a successful business, you have to go after them.
That’s why it’s vital to dedicate enough time to marketing strategy. You need reliable campaigns, targeted advertising, and solid content.
Remember that growing a business requires a consistent lead generation, the ability to nurture relationships, and compelling salespeople.
Any business is a numbers game. You have to be prepared to stay on top of your finances.
If you lack experience, hire professionals to do it for you. And if you don’t have the time, outsource your accounting.
Understand that your business may not always go according to plan. Your initial plan and projections may fall short. But you have to keep an eye on things to spot issues and take action.
Some people start their first business after getting some experience working for others in their preferred niche.
Others go into business for themselves with an even lighter background.
Whichever the case may be, consider asking for guidance and training.
Having a mentor from the earliest stages of your business can be an invaluable asset, especially if your main goal is to one day mentor others on how to improve their own businesses.
While it’s true that you can learn from your mistakes, that won’t happen if you don’t have the knowledge and insight to understand what you’re doing wrong.
It takes a certain level of commitment and passion to start a business and make it successful. Unfortunately, not everyone has that.
That’s why it’s important to set exciting and also realistic goals. Look beyond financial freedom and find other things you can get from helping others.
In the end, composure and drive help you succeed. So find the right motivators to keep pushing forward.
Having a detailed business plan is critical to any venture.
It helps you understand your goals and keeps you focused on what to do. At the same time, it can help secure vital investments for growing your business.
Here’s an outline that may be of help if you need to create one for your business.
Always start with an executive summary. This is a brief outline of the business plan that contains the proposal and objectives.
It’s an overall snapshot of the proposal that will get a lot more detailed later on.
The background section contains information about what the business does and also how everything works and the current stage of development.
Here, you must explain the niche and highlight how the business fits in it.
Offer relevant information about the services provided. In the case of a B2C company, you may substitute with product information.
Make sure to cover all the benefits, costs, and so on.
Business plans should always contain a detailed market breakdown. This includes things such as barriers to entry, market structure, among other market characteristics.
The market breakdown section requires a fair amount of research. That’s why it’s the part that often takes the longest to complete in great detail.
As for the marketing strategy, this is where your business plan outlines your ideas on how to build awareness. Write about how you plan to market your business, package your offer, and sell it.
If you want to create a really detailed business plan, don’t forget to cover the day-to-day operations. Outline how everything runs and create a clear outline from production to sales.
This is particularly relevant information to any financial investor.
This is an optional step, but if the goal of the plan is to secure funding to start strong, you wouldn’t want to skip this.
Provide a clear picture of the key roles that the business needs. Define those roles and perhaps even the type of employees desired.
Your business plan is all about getting that proposal to make sense. So, the goal is to state your requirements clearly.
At the same time, list the benefits that your proposal brings to the table.
Apart from the sales and cash flow projections, another important element of this section is any trading or existing balance sheets.
Again, a business plan isn’t only for proposing a new business. It’s also a useful tool when you want to pivot or seek funding for a struggling venture.
So make sure to include a dedicated subsection that evaluates the risks.
Some industries are highly regulated and you may have to include legal disclaimers or any permits needed.
Keep everything that has to do with the law in a dedicated section, most commonly somewhere near the end.
An often overlooked aspect of business plans is the flow. A comprehensive plan can get very detailed and this is where you want to figure out how to lay the plan out and build anticipation for the proposal.
To begin with, you can use a story formula that goes: premise, context, and realisation.
Always remember that a good business plan not only has all the necessary details but also has a good flow. It’s crucial if you want to make the reader sign on the dotted line.
Creating and following a realistic budget for your startup is essential. In fact, it can even determine whether or not your business makes it out of the gates. A budget shows you how much money you’ll need to make in order to break even and highlights what you can and can’t afford. It also helps you to forecast and manage your cash flow, which is essential to keep your business in good financial health. Budgeting can be a daunting task but this guide is here to make it easy by breaking it down into four simple steps.
It takes money to make money, and it’s important to work out how much you’ll need to launch your business. Think about what you’ll need in order to start serving customers, whether that means setting up a website or opening the doors to a brick-and-mortar establishment. You can generally group your costs into three main categories:
Remember to stay mindful of smaller costs; it may be tempting to overlook them, but they can add up very quickly.
Your monthly expenses are the costs associated with the items and services needed to run your business. You’ll need to have an idea of how much you’ll be spending each month in order to calculate the amount you’ll need to earn to break even. These expenses fall into four different categories:
It’s difficult to know how much you’ll actually earn during your first few months in business. What’s more is that your monthly revenue is likely to fluctuate, so do your research and take a look at how similar business models fare throughout the year. If you’ve hired an accountant or financial consultant, they might be able to offer some valuable insight. Factors such as retainer contracts and industry-wide seasonal trends will also help you to predict what your income. However, it’s advisable to remain conservative with your estimates to prevent overspending.
Cash is king in business and maintaining a healthy cash flow is essential for survival. Bear in mind that you won’t always be able to collect money for your goods and services straight away, which can lead to cash flow issues even if profits are sky-high. A booming sales month is great, but you may have bills that are due before you’re able to collect payment. If you don’t have money set aside for this instance, you’ll find yourself in hot water. In this sense, cash flow is just as important as profit for the financial health of your business.
It’s wise to set aside some business savings for times when the cash flow slows to more of a trickle. Review your cash flow each month to spot patterns, prevent overspending and budget for the future.
Finally, it’s important to follow the golden rule as you work through the above steps: stay conservative. Highball your expenses estimate and be prepared for low sales. This helps to protect your profits and keeps you on your toes to prevent overspending. Careful budgeting allows you to make prudent financial decisions and keeps your startup on track for financial success.
With over 10 years of experience in bookkeeping and payroll, I can offer your business a safe, reliable pair of hands for your day to day finances. I enjoy pushing myself to expand my knowledge and skill set, passing these benefits onto you. I am now a licensed bookkeeping member with ICB, and I hold an AAT Accountancy Diploma. Additionally, I am now an associated member of the Certified Institute of Payroll Professionals.
Morecambe, LA4 4QU, UK
Practice Number: 21858
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