All businesses need adequate funding to run them. Many new business owners go into business thinking that they can take out a salary, as they previously did as an employee, regardless of how well the business is doing.
A certain amount of capital is needed to get the business set up and going. But many business start with too little funding. When cash flow problems hit, it can be all too easy to use credit cards, incurring high rates of interest, or delay paying taxes - resulting in more interest and surcharges
It is a common mistake to spend whatever money the business takes without keeping any back for paying tax. Sooner or later the tax has to be paid and a large tax bill can hit a business hard.
Good credit control is essential to the cash flow of the business. It is also important to build a good relationship with your bank. All banks like to say "yes". They really do. After all, they are in the business of lending money and providing services. But banks want a quality solid customer base into which to extend reliable and profitable lending.
An important implication of all of this is that you must have accounting and reporting systems that are good enough to give the bank all the information they need, when they need it! This means being able to provide regular and accurate financial information - including budgets, forecasts and commentaries - that should demonstrate your continuing ability to service and repay any debt. You should also have clear corporate and financial objectives and business strategies designed to meet those objectives.
There are also a number of government sponsored lending schemes, incentives and grants for new businesses. Not every business that is entitled to these grants applies for them. You should check to see what is available before you spend money on, for instance, new equipment.
Having a good bookkeeping system producing accurate numbers will help you to make the best possible decisions towards securing a profitable business. Cloud systems like Xero will automate the credit control systems needed for the prompt payment of sales invoices. They will also produce the up to date figures that will keep banks happy and make it easier to raise finance when you need it.
