smallbusiness.co.uk: Helping your business think big

In association with Alliance & Leicester

Without sufficient funding your business will fail; smallbusiness.co.uk's Top Ten Finance Tips contain advice on raising funds, conserving cash and bookkeeping, all of which can help safeguard your business' future.

1. Aim to raise more money than you needYou often only have one chance of raising money so take a close look at what you think you will need. It is very difficult to go round a second time and ask for more. If your figures are too conservative, it could make your business proposition unviable.

2. The bank is not your only port of call
There could be better and cheaper alternatives for raising finance, depending on what you need. Work out exactly how much you need and for how long– re-mortgaging your house, for example, would not be suitable if you need money for the short-term. If you need money to buy equipment, consider renting and leasing options.

3. Keep the people who matter in the knowEnsure you recognise the needs of all the people involved in your business, and don’t keep them in the dark. Banks and the inland revenue, for example, are more likely to be sympathetic to your needs if they keep them informed about the business.

4. Cash is king
If you are going through a cash shortage tell all the people who will be affected. Contact your suppliers and ask if you can renegotiate your credit terms by extending the time you have to pay them, or by paying in instalments. But make sure you can afford any re-negotiated terms – this will help to restore people’s trust in you and your business.

5. Set strict payment proceduresA sale is not really made unless it has been paid for. Never grant credit to customers without checking their background. When customers ask for credit, ensure you get references from other suppliers who work with those customers. Ensure payment terms are included as a condition of the sale.

6. If you are chasing debts, stick to set procedures
For example, you could send a duplicate invoice to begin with a deadline for payment, and follow this up with a telephone call after the deadline has expired.

7. Be conservative and realistic with your forecastsThis is the basis on which you raise money, negotiate premises and order raw materials. Forecasting does require a certain amount of estimating, but make sure your figures have some grounding in fact. Try to discipline yourself by making forecasts on a monthly basis. If cash is very tight, forecasting will need to be done on a weekly or even daily basis.

8. Keep the books or get a good bookkeeper on boardKeep a record of everything – all payments, bank statements and bills. Bookkeeping may be one of the more tedious aspects of business for small firms, but it’s important to keep a firm track on money going in and out. There are a variety of software packages available to help you computerise your accounts.

9. Shop around for your banking needsThere is so much competition between banks at the moment that you can afford to take your business elsewhere. But insist on finding out as much as possible about all the charges that apply to your type of business. If a bank tries to tempt you with a limited period of free banking as an introductory incentive, make sure you know what the charges will be when this ends. Limit the number of transactions you make – use credit wherever possible.

10. Everything is negotiableDon’t be afraid to negotiate any and everything, from the rate of interest on a loan to the time you should start paying back the loan, to when you need to pay your suppliers. It never hurts to ask!

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