Tag Archives: finance

Treat your business finances like your personal finances

 

moneyWe’ve all become fairly used to managing our personal finances. So why does the mere mention of business finances send many of us into a tailspin? It may help to begin to think of your business finances like your own personal budget.

After all, every business needs a set of financial goals, just like every person should have financial goals for themselves. Goals all have one outcome, financial success. And why wouldn’t you want that for your business?

Think about these personal financial goals and how you can adapt them for your business.

 

Keep an emergency fund

 

This one is simple. An emergency fund, essential for both personal and business finance, ensures you have a little bit of cash spare should the worst happen to you. You really do never know when an emergency could happen to your business.

 

This could mean a client not paying their bill or expected work falling through. Your emergency fund should be enough to cover the running expenses of your business for at least a few months.

 

Spend less than you earn

 

The most simple lesson in finance but the most important. Don’t borrow money. Not to buy things and not to pay your bills. Doing this will mean you’re always behind with your expenses and can never get ahead.

 

Of course, the exception is when you need to borrow morey from the bank in order to expand your business. These loans, for machinery finance or other essential equipment, will be an important part of your business plan and cash flow projections. The outcomes of these types of loans should be clear and payment terms must be stipulated upfront.

 

Ensure your expenses are minimal

 

In the personal finance world, this involves living in a tiny house and driving an old car. In the business world, there are a number of ways to make this happen. You don’t need to have offices in the most upper-class part of the city. You don’t have to have an office so big that every employee has their own private space.

 

By minimising your expenses in these areas, you can already make a significant impact on the amount of money your business is able to save. And without having a negative impact on you or your staff members.

 

Increase your net worth

 

In personal finance, the goal of many people is to pay off all debts and save enough money to never work again. A business works in the same way, with a few differences – you do want this to continue, just not with your continued input.

 

In business, you should aim to pay off all loans and debts, and increase your monthly income so that you’ll turn a profit every month. Soon you’ll have enough cash flow that you’ll be able to pay your own salary and reinvest into the business.

 

Thinking carefully about both your business and finance goals is essential. These simple goals will soon see you making more considered financial decisions, in your business and in life.

Business trends that will matter in 2016

picWe’ve never been able to accurately predict what businesses will face over a year. However, we can examine unresolved issues that show signs of worsening or improving – but, which, nonetheless appear important for all in the business world. 2016 is no different and it’s important to focus on those areas businesses need to concern themselves with.

Coming from last year, we all noticed an increase concern and focus on cybersecurity.

As the world becomes more and more digitally engaged, we rely less and less on physical documents to track important data. This has meant, however, that other kinds of thieves have been able to acquire our important data – meaning we have had to alter our security priorities to be more focused on digital security.

This hasn’t negated on the ground security, such as having proper control consoles or security guards, though – those still matter, but it’s that we have had to add additional considerations for our way of thinking about security.

Writing in Forbes, Frank Sorrentino notes:

“As we look to 2016, cybersecurity threats continue to prevail, particularly with the rise of fintech and the growing push to develop faster methods of payment and innovative ways to transact. While these advancements are undeniably valuable, new technology breeds new security and fraud risks – thus, we should all make sure to carry over this sense of vigilance and responsibility regarding cyber protection into the new year.”

Another important dynamic will be small businesses, considering how much they are able to help drive an economy. Documenting the many types of small businesses in Harvard Business Review, Karen Mills notes:

“An important but less well-documented type is comprised of an estimated 1 million small businesses that are part of commercial and government supply chains (referred to as suppliers). These businesses are often focused on growth, domestically or through exports, and operate with a higher level of management sophistication than Main Street firms.”

Finally, another important focus for business will be premised on what banks will do. As The Telegraph points out: “Both capital and liquidity have increased in terms of quantity and quality, with equity capital held by banks at least 10 times greater than it was at the time of the crisis, liquidity up around fourfold and leverage broadly halved.”

The article highlights the questions banks need to be asking themselves in 2016; and, similarly, these questions and the various answers matter to businesses to in their responses to the banks’ decisions.

2016 has started off harsh for everyone and it’s important that businesses keep an eye on what’s to come.

Will the internet destroy traditional forms of information gathering?

Some of the biggest names in the world today emerged as a direct result of the Internet. For example, one of the most popular videos on YouTube “Gangnam Style” has been seen 2,092,676,383; the creator, Psy, has travelled the world and been received with lavish praise. The young popstar Justin Bieber emerged as a direct result of the same site. There’s little doubt it’s aided careers of performers all over the world to break into industries and accelerate their popularity.

The internet has of course changed various dynamics in how we get careers. Aside from world famous celebrities, many people are taking courses in subjects they either couldn’t or would never have thought of; the barriers to knowledge are mostly dropped as vast swathes of information are freely available for consumption. Everything from WikiPedia to the Guardian is available to read online.

Online learning has also taken off. Of course, many are not legitimate enterprises so it’s necessary to take stock of which ones are real and accredited, and which are not.

Many things can be done online, including various kinds of trading as seen with sites like Mirrovest. We can shop for our groceries and have them delivered to our door from accredited stores. We communicate and debate and laugh, we watch films and play games and investigate foreign countries – all from the comfort of monitors.

Many people might think this is detrimental to experiencing life itself. After all, looking at the sea from a monitor versus being at the beach are two different experiences. Falling to earth from outer space versus watching a Go-Pro of someone doing it are two different things.

The question is whether this is a difference in degree or kind.

Degree and not kind

Before the internet, did there exist a format where we experienced adventures, foreign lands, strange people, without ever leaving? Was there a way for us to communicate our opinions and ideas without engaging with them directly? Of course: that’s what books and letters were for.

Newspapers have been around for hundreds of years, conveying information from foreign places and about distant events. Again: people have not been directly involved in events they knew about and had an opinion about for ages.

The Internet does only one thing differently: it conveys things in real time (and notifies you). But being instant is the only way it is different in kind, rather than degree. Otherwise, the Internet is not particularly unique in how we as a species have engaged in information.

This means any concerns about how we learn and think and market, about how we advertise and distribute knowledge isn’t unique to the Internet. People have always had to think about the medium of communication. The Internet is simply the latest medium in a long, ever-growing list of forms we’ve communicated.

(Image credit: Rock1997 / Wikipedia)

Starting a business while on a budget

The rise of megacorporations seem to happen like magic: one day there exist this number of business, then suddenly a new business emerges with billions in finances and offering services or products we didn’t know we needed. We imagine these spaces to come from some magical land, filled with fortune, where the owners were born into wealth or had wealthy clients and investors willing to support them. But the reality is far more complicated. Indeed there is no reason a powerful business, like powerful people, can’t begin from humble beginnings.

Success of business isn’t tied to any formula, but a number of different properties and factors.

“Success,” says Forbes’ Micha Kaufman, “ is mostly determined by liberal amounts of “sweat and hard” work. It’s why passion is so essential: It sustains us through the hard times, and rewards in ways money never can.”

Importantly, for Kaufman, being connected and engaged is essential – which is why, in this day of online connectivity there is no excuse. Indeed, so important is online presence that it’s almost unheard of to not have a website. But, also, how you respond to social media portrayals. People have lost entire careers after social media faux pas, resulting in businesses themselves suffering.

By being connected, you alert the world to your and your business’ existence. Great marketing like this can do wonders for your business and brand. Considering almost all the big social media brands and apps are free, you don’t need a budget at all for this – except to pay the hours for someone to manage it.

And here you can higher students: not only are younger people more tech-savvy than older, but also they can get the first steps into the world of adult careers. Interns don’t have to earn a salary, though it might be ethical practice to pay them. However, due to their inexperience, this means you never have to pay the same for someone who is an experienced social media manager.

Mark Kingsley-Williams, founder of Trade Mark Direct, told the Guardian there are important first steps that people should consider.

“Starting a business should be all about getting information quickly to prove whether the concept will work, not maximising margins from day one. It is better to start out renting or leasing premises, company vehicles, IT equipment, and so on, rather than buying, and taking on people as contractors rather than employees, which you could consider once the business is more established.”

So whether you take out asset finance or look for used cars for sale, it’s necessary and possible to keep your budget low for the beginning part.

The rest of it should then be a basis on obtaining more clients, improving your business strategy, increasing your workforce, expanding your business. This means more income and therefore a bigger business. And all of that, as we’ve seen can happen on a budget – but what that also means is it can happen because you’ve already demonstrated you can be smart.

Which is something any client or investor is looking for.

What is asset finance and how can it help your SME

The first concern of any business is balancing costs and expenses alongside retention and profit – in actual fact, mere survival. Obviously, the aim is to have more of the latter and less of the former: at the very least, you want them to even out in a way that allows you at least some profit. There are many ways to help achieve this, but one important way is to consider asset finance, due to every business needing assets in the first place to at all survive.

Asset finance

In order for you to even function, a business requires assets. Assets are usually considered to be those things like equipment, cars, etc., that allow you to do the business at all. However, when starting a business, obtaining the best assets – which allows you to do the best business – can be difficult, if not impossible. After all, you’ve put a lot of money down already into the business; now you need even more to merely make it function.

Asset finance is an umbrella term about financial solutions to obtain assets without incurring too much of a penalty, if done and chosen correctly. One financial assistance site notes:

“Many businesses don’t have enough available cash to consider an outright purchase, making asset finance a necessity. Even if you can afford it, you want to put your money to good use and investing cash in assets leaves you with less working capital to finance operations or explore new growth opportunities. The flexibility of asset finance allows you to align repayments to suit your cash flow and you may be able to claim tax deductions.”

Thus, there is a way to work on obtaining the desired assets while also keeping your costs lower.

Options

But, as we noted, asset finance is an umbrella term.

For example, you get the option of leasing the asset. This is, as the name suggests, paying to use the item. At no point, of course, do you own it. There is usually no deposit, but that depends; further you are tied to a certain amount of time, since this means the lender obtains a profit from their leasing service.

The obvious advantage is that you can acquire new items that help your services quickly. You can even sometimes have the option to own the product, if you have enough money – though that’s not the point of leasing itself.

There is also “hire purchase”, which means:

“Giving you a fixed or variable rate, with this option you generally pay the VAT and an initial deposit at the start – followed by a simple, structured repayment profile designed to facilitate cash flow.”

Thus, at the end you own the asset entirely, but manage your payment in a way that makes the least impact on your cashflow.

Impact on business

As a growing business, you need to be doing all you can to keep costs low. And asset finance, and its different options and perspectives, as well as the option to acquire said assets, makes for an important consideration. Of course, if you had the money in the first place, it would be best to purchase – but that can be an option for later, when your business has grown and the assets are in place to secure a financially viable future.