With many small businesses currently stuggling as the global credit crunch really begins to bite, now is a particularly apt time to make sure that your company’s finances are in order. Holly Heald of Just Financial Solutions offers her top ten tips that all small firms should adopt to keep their heads above water.

1. Make financial reports your best friend

Don't be afraid of financial reports. Basic reports such as your profit & loss account, sales forecast and cashflow analysis, should be your best friend - putting you in control of your business finances. Get to grips with it early on - you do need a clear idea of the level of sales you expect to achieve and your costs.

2. Always Budget

Budgeting is the most effective way to manage your business' cashflow, and allows you to take advantage of any new business opportunities. Always have a contingency fund and, most importantly, be realistic.

3. Monitor your finances regularly

The best financial reports in the world are useless if you don't review them regularly. Take time to monitor your finances at least monthly. This will allow you to identify any potential problems in advance and take steps to avoid bigger problems later.

4. Cash is king

Never underestimate how much cash you need. Many businesses fail because they don't have enough cash, not because they are unprofitable. Review cashflow regularly, and carefully balance any credit given to customers with the terms of your suppliers. Don't be afraid to negotiate with suppliers.

5. Manage Risk

Going into business is risky enough - avoid unnecessary risks, for example, by using insurance wisely to avoid unexpected costs.

6. Don't forget your most valuable asset

Many businesses fail to think about what they would do if a key member of staff was suddenly unable to work. Think about using insurance where possible to mitigate these risks.

7. Protect your share of the business

If you are a partner or a company director protect your business in the event of a partner or a co-director becoming ill or dying. Life assurance, for instance, is historically cheap. On the death of a partner or co-director it can be set up to i) provide funds to purchase shares or repay capital accounts and ii) give bereaved families a fair share of the business.

8. Maximise the returns from your bank account

Many businesses need a reasonable amount of cash in the bank, not least for their tax liabilities. Make your money work for you by always getting a competitive rate of interest. But don't leave too much money in your current account - most banks allow you to transfer funds quickly between current and deposit accounts allowing you to earn as much interest as possible.

9. Consider all your funding options

If you need to borrow money to get the business started always consider all your options and check whether there is any financial assistance available, such as grants. Don't blindly accept the first offer you receive. Always read the small print and get advice if you are not sure.

10. Get Professional advice where appropriate

Don't avoid professional advice because you think its going to be expensive. Good advice often more than not pays for itself.


Holly Heald is an independent financial adviser for Just Financial Solutions Limited. For further information, please visit www.jfsolutions.co.uk