Financial planning is something that doesn’t always come easily. But for business owners, it’s an essential part of running your business. Making sure that your financial performance is on track to meet your goals and allowing you to still operate in profit is all part and parcel, but many business owners don’t include financial planning in their wider business plans. Today we bring together our top 9 financial planning tips for small businesses to help you achieve successful financial and business planning, growth and increased profits.

Why Invest in Financial Planning?

Financial planning is one of those things that is often seen as a luxury – something to look into once you’ve got a nice sum of money in the bank. But in reality, it’s much more essential to your business early on.

There are 4 key areas that make business financial planning essential:

• Outlining the scope of your business
• Identifying potential funding problems
• Setting out your financial goals
• Measuring success

Without identifying and exploring each of these areas, you may find it difficult to secure investment or funding in the future. And while that might not be on your radar now, you may feel very different a few months or years down the line.

Our Top Tips

So, what are some of our best tips for small business financial planning?

Have a Plan: We’ve talked about this before, but it’s worth mentioning again. Having a clear understanding of what you want your business to achieve is the most important step to achieving it.

Business Goals vs Personal Goals: Separating out your business and personal goals can be a challenge; especially if they are at odds with each other. For example, growth and expansion in your business may mean borrowing more, which might be going against your personal goal of saving. Finding a balance between the two is tough, but important.

Stay in Control of Costs: Don’t hide your head in the sand about how much you’re spending, or how much you’re bringing in. If you’re aware of income and outgoings, you can ensure you’re well positioned to make a profit and can make changes quickly if needed.

Monitor Cash Flow: This goes alongside our previous point. Without cash flow a business can’t stay healthy. You can’t pay your suppliers or employees, or manage your overheads. Keeping an eye on your accounts payable and closely monitoring creditors and debts means you can ensure your cash flow stays under control and healthy.

Look into Borrowing Options: You might not right now, but at some point you’re going to need capital or investment in order to grow. So look at your options (like secured/unsecured loans, business loans, start-up finance, invoice finance, private equity funding etc) and decide what will be best for your business. Factor these into your strategy, so you know if and when you need it, what your next steps are.

Pensions: If you employ more than just yourself, then by law you will need to provide a workplace pension. This means being registered, meeting the regulations of the workplace pension scheme, and having the cash flow to provide it.

Exit Planning: Again, this might seem a long way in the future, but you need to start your exit planning a long way before you actually want to exit. So, take some time to worm out what happens to your business if you decide not to be a part of it anymore. A robust plan for your exit means you can secure the future of the business and those in it.

Your Financial Safety net: Just like your personal finances, businesses should have a financial safety net in place in case of hard times. Many businesses are currently finding out the hard way how important this is, with Covid-19 ravaging business cash flow. As a business owner, you may have personal assets tied into the business, which can also have an impact if something were to go wrong. So separating out assets and creating a safety net for your business is crucial.

Keep an eye on tax: This is one of the most painful financial planning tips, but if you don’t understand and engage with your tax liabilities, you may find yourself on the receiving end of a big bill from HMRC. So make sure your accountant is aware of your business activities, seek their advice, and start putting away some money for the corporation tax bill in advance.

At Chilvester Financial, we aim to provide just the financial advice you need, when you need it. Our advisers are always on hand to help you understand your business finances, create financial goals for your business and build a solid financial roadmap to help you achieve them. If you’d like to know more about financial planning for your business, just get in touch with us today to book a consultation with one of our advisers.

There is no denying that Covid-19 is a crisis. In fact, it’s what we would describe as a ‘Black Swan Event’ – something that comes as a surprise, has a major effect, and will probably be pretty predictable once we have the benefit of hindsight. But right now we are sailing in uncharted waters, and a lot of businesses who thought they had a solid disaster recovery plan in place are starting to realise one thing – they may not be as prepared as they thought they were. Or at least, they didn’t put ‘pandemic’ in the list of things to prepare for, since they happen so rarely! So now the focus of most business owners has shifted to protecting employees, understanding the risks to their business, and managing the disruptions to cash flow caused by the virus. Cash flow management isn’t a simple thing at the best of times, but managing your cash flow in a crisis? That requires some detailed planning and quick action. To help you out, here are a few steps you can take to get things under control as fast as possible.

Adjust Your Business Plan to Improve Profit Margins

A cash flow shortage might seem a bit scary, but it should also lead you back to the basics of your business plan. Back to analysing your planning, processes, operations and expenses, and what you could do to improve them. In other situations, we would tell you to look for the root of the issue and determine whether it’s a short- or long-term problem, but with Covid-19 the cause is pretty clear. Instead, use your profit and loss accounts and identify the areas of your business that are the most and least profitable, and adjust your business plan to favour the more profitable. Optimise your pricing structure and identify areas of waste or unnecessary spending that you can cut, even if it’s just on a temporary basis.

Speed Up Accounts Receivable

It’s not often we would say this, but you can also take a page out of the Tesla cash-flow-crisis-playbook and speed up your accounts receivable. The faster money starts flowing back into your business, the sooner you can get back on a level footing and operating as normal. In Tesla’s case, they sped up their receivables by offering and accepting pre-orders for a product before it even hit production, but you can use other strategies to accelerate your receivables. For example, you could:

• Ask new customers for a deposit/partial payment. If you don’t already, start invoicing for all, or part of the service/product up-front, before delivery. This not only shows that your client will be willing to pay the full amount, but means your business gets a boost as well.
• Start sending invoices early. Adjust the management of your receivables to invoice clients immediately following the delivery of products or services, rather than sending out all invoices on a particular day of the month. The sooner you send an invoice, the sooner you will receive payment.
• Send invoices more frequently. If you work on a service or project basis, stop waiting until completion to ask for payment. Start sending invoices every week or two weeks to cover the services up to that point. This will make it easier for clients to afford and give you a more regular cashflow boost.
• Focus on money you’re already owed. If you have outstanding debtors, now is the time to call them in. Start making phone calls and collecting money that should already be in your account but isn’t.
• Make it easy for clients to pay. If it’s simple to do, clients are much more likely to pay promptly. If you can, look at mobile and electronic payment options, credit cards or direct debits.

Negotiate with Suppliers

Supply chains are a bit precarious right now for many people, either because of a shortage of materials or because their customers can’t pay. Rather than just avoid paying, or avoid ordering, talk to your vendors openly. They understand the strain businesses are currently under, and if you open up a conversation then you may find they are willing to work with you. While some might be unwilling to budge at all, the odds are that vendors who you’ve been loyal to and worked with a while will be happy to come to an agreement during a right situation. You never know unless you start the conversation, so it’s always worth trying.

Consider Your Borrowing Options

Cash flow shortages can be caused by a lot of things, but at the end of the day it still means more money is going out of your business than coming in. One way to solve this is to find a way to bring money into the business. During Covid-19, the government has launched a number of support and financial aid packages to help tide businesses over through the difficult period, and it might be worth your while to look into them. Of course, you should always approach loans and credit cards in an informed and careful way, making sure you understand the interest rates and have a plan for paying the money back in the future. Remember that if your business has an intrinsic problem that’s causing, or adding to your cash flow problems, then debt might just be putting a band-aid on the problem, rather than solving it.

At Chilvester Financial, we understand how difficult Covid-19 is to cope with, and how much it has impacted businesses in every industry over the past few months. Despite the fact we can’t be in the office, the team are still able to give you advice or support over the phone, help you with your cash flow planning or offer our thoughts on your strategies moving forward. So, if you need some advice or information on the support out there, just get in touch with us today.

Covid-19 hasn’t gone away – but we’re sure you’ve noticed that. As we enter our 8^th week of lockdown, businesses are becoming more and more worried about their financial health and cashflow, and are now looking for ways to address, improve and ultimately recover from any damage the pandemic may have caused. This plan will look different for every business, and probably includes applying for some form of government support to tide them over through the particularly difficult days we find ourselves in now.

But this blog isn’t here to talk about the kinds of aid you can apply for during the pandemic – the Government have tools to help you decide which of their support structures are best for your business and how to apply them. So instead today we’re going to talk you through a simple, 4 step approach that can help you manage your business finances now, and put you on the road to recovery quickly, even as the pandemic and nationwide lockdown continues. And to showcase how well this should have been done, we’re going to take the example of retail giant Tesco.

Stop The Bleeding

If you think of your business as a patient who has just been in an accident, the first thing you need to do is stop the bleeding, so that you can see what you’re dealing with. Many businesses have been in panic mode since the lockdown began, and with the latest announcements showing that this will carry on for a while, now is the time to do some rapid diagnostics and short-term cash management. This means:

• Control your cash, evaluate your spending and identify a short-term action plan.
• Go back to the drawing board and reforecast your liquidity. If you need to, look into securing financing or government aid to help tide you over.
• Your stakeholders are an important part of your business, and it’s essential you keep them in the loop and well informed. This means staying in regular contact with key stakeholders like customers, suppliers, banks and regulators, and anyone else who has a key interest in your business.

For Tesco, this meant cutting orders of non-essential items in the beginning, re-evaluating the profitability of each store, and sending out separate email communications for their shareholders and their customers outlining their planned changes and when they will come into effect.

Analyse The Business

Once the more immediate panic has been addressed, it’s time to regroup and stabilise. This involved two steps, analysis and planning. Firstly, you should perform a clear data analysis of every area of your business, and how you have been responding. This means:

• Identify, understand and address the underlying drivers of the situation. Obviously Covid-19 is at the heart, but if you can try to look deeper, and understand why Covid-19 has had the impact it has on your business.
• Conduct a data-driven assessment of the opportunities for your business to recover and expand, and put them in a ranking order based on their value and their complexity to achieve.
• Create and start a regular communication plan with key stakeholders.

For Tesco, the driver behind the situation is purely Covid related, but the knock on effect of that is that the style of shopping in the UK has changed. Instead of doing multiple shops throughout the week, people are reverting to doing one larger shop per week instead. So while their profitability might not have been impacted, their cashflow has. They have also put precautions in place in stores and added more and more home delivery slots to ensure every customer can still shop with them, and have been sending weekly update emails to all stakeholders with information tailored to their level of interest and investment.

Develop A Restructuring Plan

For many businesses, there will be some changes needed to weather this storm and come out thriving on the other side. These might be small changes, or they might be big ones that require a restructure of your business, workflow or product offering. This step is all about working out what your business needs to look like in order to remain profitable, and creating a plan to achieve that. This means:

• Develop a detailed and quantified restructuring plan that key stakeholders can support.
• Implement new capital arrangements if needed.
• Execute actions for potential accelerated M&A or closure of business.

Going back to the Tesco example, they have closed certain stores, changed opening hours and altered the way the order stock in order to meet the current demands.

Implementation

Finally, you reach the implementation phase, which is where you put everything into action as rapidly as you are able to, and monitor your progress. With a situation as rapidly changing as a global pandemic, business owners need to be paying close attention to their business and thinking on their feet with quick changes. This includes:

• Supporting the implementation of the restructuring plan.
• Tracking your progress by monitoring KPIs and the achievement of any new milestones you’ve set yourself.
• Refine your operational and financial plans as required.

At Chilvester Financial, we are still on hand to help you plan your business finances, both now in the midst of uncertainty, and carving out a path for the future, when this pandemic will be a distant memory. If you would like any help and support through these difficult times, we are here to help. All you need to do is get in touch, and we can arrange a free, no-obligation consultation with one of our advisors over the phone or Zoom. So if you need anything, please don’t hesitate to get in touch.

Stay safe everyone.