Basic financial management for small businesses

Managing your business finances efficiently and properly is crucial to your success.

As a small business, keeping on top of your finances as you seek to grow and prosper is essential. Here are some important things to consider.

What is the next stage for your business? Does your business plan and financial forecasts reflect the next phase of company growth?

A good business plan is key to convincing a lender to offer you finance. If you’re not sure how to do this, seek advice.

A proactive, qualified accountant can help, but there are plenty of sources for advice on our Finance Hub, including the following articles:

Are you monitoring cash flow and do you have a person responsible for chasing customer payments? Have you established a procedure for dealing with late payments from customers?

If you really want to try and improve your cash flow and limit the number of late payments you receive from customers, it may make sense to have a dedicated person whose role it is to chase those payments up. You may also find it useful to establish rigorous procedures to deal with late payers.

Learn ways to tackle late-paying customers in our article, How to deal with late payments

Do you have a system of budgeting sales, and do you compare this with reported performance?

With sales budgeting, your aim is to plan for and control how you use resources (whether that’s money, materials, facilities or people, for example) to achieve the sales targets you’ve set for yourself. The idea is to bring about as much profit for your business as possible.

The process involves allocating resources to various compartments within the budget, then going back after the work is complete and comparing budgeted resources with their actual use.

To learn more, read this in-depth article on sales budgeting and this piece on why a sales budget is central to effective business planning.

Does your business have enough finance to meet its needs? Is accessing finance a problem? If so, what are you doing to address this?

If you find that your business needs more cash to grow, or even survive, there are various options open to you. However, you should seek professional advice as to how to remedy the situation.

On our Finance Hub, you can learn more about typical finance options for your business, to help you make an informed decision.

If debt has become an issue for your business, read our article on the importance of talking to your lender.

Do you produce regular management accounts?

Monthly management accounts tailored to your needs can give you the financial information required for you to be able to understand exactly what’s going on in your business. It's a great tool in helping you to make business decisions.

The accounts should include basic information such as:

  • your key performance indicators (KPIs)
  • a profit and loss statement
  • your cash position
  • your balance sheet

Accountancy firm BR Accounting and Business Services have written a useful article explaining management accounts.

Regional support

Enter your postcode to find business support and case studies from businesses within your region. You'll be taken to our interactive map.