Back to Basics: Managing your finances

Let's be honest, talking about finance is for most of us about as interesting as watching paint dry. It¹s not why you came into business, is it? Most entrepreneurs have a vision of their business and it does not revolve around finance and balance sheets.

But if you have read this far it could be that deep down you feel you are in need of some advice.

Why do so many people seem to leave it so long before checking the financial health of their business? Well, in part it is because many have an overriding belief that things can only get better.

But all you need is one wet summer or a credit crunch and the future might not be quite as bright as you had hoped. Crossing your fingers and holding your breath simply does not work. It¹s best to have a good honest look at the state of your business.

Start by asking yourself these 10 questions:

• Is your business performing in line with your original plans and forecasts?
• Have your sales improved over the past year?
• Have you recently matched your exisiting payroll to the current needs of your business?
• Do you question whether the purchases you make add value to your business?
• Have you recently checked your suppliers¹ prices (and your competitors')?
• Do you know your gross margins and stockholding?
• Is your cost of finance punitive?
• Are your debtors kept to a minimum?
• Do you ignore your creditors' telephone calls?
• Do you owe money for VAT or PAYE?

If you are starting to feel a little uneasy now then don¹t continue to bury your head in the sand. Bottling up your worries will only make you nervous, snappy or just plain miserable, and that will make your staff feel a little unsettled as well ­ after all, walls have ears.

Think about the messages your behaviour sends out to them and the other stakeholders in your business that you have regular contact with. Have a haircut, put on your best smile and make a plan.

Delegating

Break down the critical areas of concern into bite-sized pieces of measurable work and learn to delegate them.

If you look at your list of tasks and say ³but I need so much time, I have a pub to run², then weigh up what can be done by you, what can be done by your staff and what can be given to external people or companies.

Accountancy and payroll, for instance, can easily be outsourced. The cost of having reliable, timely and accurate information may turn out to be small in comparison to the personal cost of your time now.

Stocktakers these days do not only count your tins of beans but can give you independent advice on margins, product costs, kitchen hygiene and menu costing. A one-off cellar and kitchen review plus quarterly stocktakes should save you more money than the cost of the expert.

Business planning

There are many more avenues to find the right people at the right price to assist your business needs. Just be sure to read any contract terms and conditions and check the small print before you hire anyone.

Set out a clear path along which you would like to see your business go and make sure you monitor progress. If you or your accountant prepare monthly accounts, take enough time out to review them. Make sure that you share them with your team as well.

Performance can only improve if everybody, including the cleaner, sticks to a common goal. You could even look at performance-related bonuses to get the message of individual responsibility across to your staff.

If you struggle with reading and analysing your performance, don¹t be afraid to challenge your accountant and to ask them to explain it to you. They may even be happy at the challenge of producing some key reports that are geared to your individual needs.

Equally, do not be afraid to change accountants and advisors. It¹s an open market out there and you should be willing to shop around. If your butcher was not up to it you would change them and the same is true of your accountant.

Taxing questions

Finally, can I give you a gentle reminder about tax, whether it is corporation tax or self-assessed income tax? I know that 'tax doesn¹t need to be taxing' but, to be honest, many of us are frightened by it.

Sensible moves are to make sure you allow yourself plenty of time, keep good records and get advice if you are unsure.

Alistair Mort is a partner at Independent Support, a business consultancy specialising in the licensed trade.​

Call 01865 893234 or go to www.independentsupport.co.uk​