An expanding business is a sign of success but there are risks that come with growth if business planning and forecasting is not undertaken at the appropriate moments.
2020 is a great example of a year that proves you cannot plan for everything but that does not mean you should ignore planning!
One of the challenges that faces a growing business is staying on top of its cash flow.
Often a business will need to spend money before it gets money in. Whether that’s purchasing materials to produce a product or paying staff and contractors to work on product design and improvements that may not be ready to hit the market for several months.
In some instances, it is possible to control your cash outflows but sustainable growth is likely to require further funding into the business.
Traditionally, businesses can look to raise finance in the format of debt (e.g. bank lending, personal loans, fintech) or through equity (selling shares to investors).
It’s important to not only understand what the long and short term impacts of raising different types of finance has on your cashflow, but also how it might impact on your long term goals for the business, including future tax bills.
There are other financing options in the form of grants and tax credits (where HMRC will actually give non-refundable cash to a business) which are not always considered which can be valuable tools for a business.
Dan White
@DanWatBF
DWhite@bishopfleming.co.uk
Three learning points:
- Have a business plan that incorporates financial forecasting
- Regularly revisit your plan and forecasts and record how you are doing. Update as the business evolves
- Ensure that you are aware of all funding options for your business and how each impacts your business differently.
