Archive for the ‘Financial Business Advice’ Category
The Importance of Having a Business Bank Account for Your New Business
Accountants in Manchester – Accounting Advice
Many small business owners avoid or do not pay too much attention when considering whether to open up a bank account in their business name. They make the mistake of using their personal account to carry out their business transactions, just so they can save a small amount of money required to open a new business bank account.
Having an account in your business name has many advantages. For example it gives your business a more professional look when dealing with your customers or clients. Using your personal account for business purposes gives the impression you are not really serious regarding your business and it is more like a hobby.
Having a separate business account proves to be beneficial when you need to complete the accounts for the business and any related tax returns. Indeed, you can quickly check the income and expenses for the year, rather than having the hassle of separating your personal and business transactions if you only have a personal account.
Another good reason to have a business bank account is to show the tax authorities that your business is transparent in terms of the financial transactions it carries out. All the income and expenses should be accounted for through the business account. Thus, if HM Customs & Revenue want to look at your records, this will demonstrate that you are declaring all your income and only claiming expenses related to business.
Opening a company account with a bank also has other additional perks. For example, you can usually obtain free banking for at least a year as a new business. Also some banks even offer new clients special deals on accounting software to use in their businesses. Lastly, as regards this point, it may be easier for you to obtain a business overdraft or loan if you have a company bank account.
Some entrepreneurs are put off from opening a business bank account because they think it will be complicated in terms of the formalities and legalities. This is a misconception as it is very easy to open a bank account most of the time.
A few points that one needs to keep in mind while opening a business accounts are:
- The account maintenance fee
- Different transaction modes available e.g. online banking, debit card etc.
- Overseas transaction charges
- Interest rate charges
- Minimal balance that you need to maintain
A company bank account may initially seem to be an extra overhead on your business, but the amount paid will be worth in terms of the time and money you will save by not having to separate out your business transactions from your personal transactions. Having a business bank account also sends a clear message to other businesses you deal with and the tax authorities that you are a proper business with nothing to hide.
The Forecast is Good – A How To of Financial Forecasts in Business
Accountants in Manchester – Financial Forecasting
Financial forecasts in business come in all shapes and sizes and each is as important as the next. Financial forecasts are the things that allow you to plan against potential crises such as cash flow problems and so it is important to make them a staple of your regular business planning.
There will also be times during the life of your business when you will be required to provide financial forecasts requested by others, especially if you are looking to finance something such as an expansion or merger, everyone from lenders to potential partners may ask for a particular forecast and the quality of what your prepare for them may determine whether or not you achieve your desired outcome.
It is however surprisingly easy to get things wrong in financial forecast preparation and understanding just what to include is something that many business owners have learnt the hard way. There are one or two simple rules to remember that should help you produce the most effective, professional financial forecasts.
The first rule of forecasting, particularly when the forecast is at the request of a third party is to be very thorough; ensure that you have remembered to include all expenses and all income, don’t forget expenses that occur annually, monthly and/or are just occasional; leaving something out may look like deception and could be awkward for you to explain.
However positive your view of your business, it would be wise to remove the rose-tinted specs before sitting down to prepare a financial forecast; kidding yourself about how much money you will be bringing in or cleaning up the expenses a little is not helpful to anyone; if you are at all unsure about the accuracy of the picture you are paining, run it past a colleague or partner first, they should be able to provide a more objective opinion.
When putting together a forecast for professional reasons, for the benefit of other business people ensure that it is clear and concise and makes sense. How you present your financial information will say almost as much about your business as the information itself, so keep it as professional as possible; make no mistake you will be judged by such things.
Probably the most important thing to remember when preparing a financial forecast, whether for your own planning or at the request of your bank, is to research the information; strange as this may sound, it being a forecast relating to your own business, far too many business owners try to ‘wing it’ when it comes to forecasting and this is never good enough. You should approach the research in exactly the same way as you would any other part of your business planning; as with things like ‘competitor research’, gather all of the information together from all of the relevant sources before you compile it; taking this more dispassionate approach will give you a less biased, more accurate forecast, and whether for yourself or for someone else, the more accurate your forecast the more useful it will prove to be.
Choosing the Right Bank for your Small Business
Small Business Financial Advice
Choosing the right bank for your business is a very important decision which you will have to make. Indeed, when push comes to shove, they may be your main financial lifeline. For instance, you may need urgent additional funds to grow your business. Alternatively, you may experience a ‘cash flow crisis’ and will need to borrow some funds from your bank quickly. Therefore, the decision of which bank to use for your business should not be a casual one but one where you thoroughly consider all of your current and future financial needs. As well as these needs, there are a number of other important issues to take on board before you make a final decision. I will look at some of these financial needs and other issues below.
Firstly, when looking where to place your business, a good starting point might be to get some recommendations from trusted friends and family. They should be able to give you honest opinions as regards their recommendations. Alternatively, if you have a good accountant, you can ask him or her for a recommendation. They are used to dealing with many businesses and their associated banks, and thus will often be better placed to know which banks and bank managers are the best in your local area.
Secondly, be aware that banking is a very competitive industry. Banks are cueing up to entice new business customers to join them. Many of them offer free banking (no interest or charges) for the first 12 or 18 months for new businesses, or for existing businesses transferring from another bank. Furthermore, some offer to pay interest on any business current account balance and some even offer accounting software deals for new businesses. Use this fierce competition between banks to your advantage and get the best deal with some or all of the above perks.
Thirdly and somewhat connected to the above point, it might be a good idea to agree an overdraft limit and possibly ‘sound out’ the option of a future business loan, before signing up with a particular bank. You do not have to necessarily use these facilities but it would be nice to see how accommodating the bank would be at this early stage. What you do not want to happen is to find out that they are unprepared to offer you either type of facility, after you have joined and been with them for a while, and your business is in dire need of financial assistance.
Lastly, like all good organisations the best bank for you should have a business bank manager with whom you get on well with. It is true that they might move on one day and be replaced with another manager. However, all you can deal with is the here and now as far as this point is concerned. A good bank manager should click with you on a personal level and be able to communicate without using complicated bank jargon. They should also instill you with some confidence, in that they understand your business needs and will help you achieve your goals through any facilities they can offer you. Finally, they should be in constant contact with you and pay you and your business some timely visits to discuss any changes to your circumstances etc… When you are deciding whether to use a bank, bear these personality and other managerial attributes in mind; treat it a bit like an interview and consider whether they have impressed you enough ‘to offer them the job.’
A Brief Guide to Managing Expenditure for the Small Business Owner
Small Business Financial Advice
Whether you are just starting out or are a seasoned business owner ‘small business’ by its very nature means that everything is reduced in size; this usually includes the budget. Having less money to play with does not mean skimping on necessary expenses, but it does mean a lot of very carefully considered cost control. It is important to remember to be realistic, running a business costs money, there will be overheads, but with a sensible budget you can keep the largest numbers in the profit column where they belong. There are some inevitable costs of course that can’t be avoided, but there are ways to reduce them.
Electronic Communication
In this day and age no one can run a business without at the very least a telephone, although let’s face it most business also have to run computer systems and pay for mobiles as well; yes the planet has shrunk and we are all very grateful for the ease that all of this communication technology brings to the business world, but it does cost. Knowing that these costs are unavoidable is actually an advantage, if you accept that you’ll need, phone lines, internet and mobiles for instance, research the various package offers that communication companies offer to business customers, getting everything in one place could save a hefty sum. Don’t be afraid to haggle either, many companies are prepared to work for your business and do have savings that they can break out if you are prepared to commit to them for a period of time.
Business Premises
Of course you will always need somewhere to operate from and rent can be one of the largest bills any small business will have to pay. This is another time when you will need to be brave enough to haggle a little; remember that there are fewer businesses around these days and therefore premises owners are keen to have committed tenants in their buildings, you may just find that they may want your customer enough to re-negotiate your rent. Of course if your operation is small enough it may be an option for you to either work from home or a converted domestic building like a garage or garden shed.
Marketing
Cutting costs here is more often than not something of a false economy; it is essential to market your business in order to keep moving forward. Advertising budgets are vital, but there is absolutely no reason to be careless with them. Constantly review where your customers are coming from, if certain advertising is not working as well as other types, make changes, increase what works and drop what does not.. By always knowing how your marketing is working for you, you are unlikely to have much wastage in this area.
Utilities
Now that the various companies out there can offer more than one type of utility it is possible to get package deals from some suppliers who can offer all of your power needs under one roof. Also look to bargain with each company for the best price, in such a competitive market they may be prepared to under cut their competitors in order to win your business.
So although one cannot ever hope to run a business for free, there are plenty of ways in which the creative business owner can run a successful budget that allows profit to continue to increase, while keeping everyday costs as low as humanly possible.
Financial Forecasts – Common Errors
Preparing financial forecasts, such as a cash flow forecast and profit and loss account forecast, should be part of your general business planning. They should be completed on a regular basis. Indeed, forecasts allow you to plan your future expenses, revenues, cash needs and growth, among many other things. Financial forecasts may also be required by third parties who have an interest in your business. For instance a bank may require an up to date forecast when deciding whether or not to grant you a business loan. Even though financial forecasts are so important to a business, and thus need to be prepared carefully, there are some common mistakes that business owners make when compiling and presenting this information. I will go on to look at a few of these common mistakes below.
Firstly, many business owners do not include all their revenues and expenses that they expect to occur in the future, especially when preparing the profit and loss account forecast. It is crucial that you think long and hard as to all the possible expenses that the business will incur. Common expenses often missed out include car tax, car insurance and other non- monthly items. If some expenses and revenues are omitted it can lead to a misleading picture as regards the business. Furthermore, if a third party highlights that you have missed out certain items then this could be potentially embarrassing.
Secondly, when preparing a cash flow forecast it is vital that you only detail anticipated cash and bank movements, in the way of receipts and costs. Unfortunately, some business owners when preparing this type of forecast include sales invoices and expense invoices that have not been paid. It is also important to make sure that you include any anticipated one off payments, such as tax or cash purchases for equipment etc…
Thirdly, some financial forecasts are far too optimistic. Sales can sometimes be overestimated and expenses underestimated. Many lenders such as banks can spot this over- optimism and it could lead them to question your judgment. Therefore, when preparing forecasts it is a good idea to prepare a ‘best case scenario’ and ‘worse case scenario’ set of figures.
Lastly, if the forecasts are going to be supplied to a third party, from a presentational point of view make sure that they are laid out properly, that they print properly and the document is presented nicely. This may seem obvious but I have attended many meetings where I have been provided with a stack of A4 sheets that are not numbered or the printing is muddled. Remember these forecasts are like a shop window for your business and therefore need to look great.