Five signs you need to rethink financial management

At Growth Street, our raison d'être is to help ambitious small- and medium-sized businesses acquire the financial resources they need to take the next step toward growth. So, what does this entail? Growth isn’t just about selling more products or services and financial preparedness isn’t just about ‘keeping the books’ for compliance purposes. Businesses wishing to grow need a full insight into their present and future cash positions.

Here are a 5 classic signs that you need more rigorous financial planning:

  • You're losing sleep because money worries come to you at night.
  • You can't really say exactly how much money go in and our of your account each month.
  • You don't know the timing of major expenses and incomings.
  • You're putting your growth plans on ice because you're afraid it will stretch you too thin.
  • You make important decisions based on your gut feeling, without up-to-date knowledge of your company's finances.

These are clear indicators that you need to work urgently on improving your company's financial management and visibility. One of the foremost challenges business owners and directors must deal with is sustaining working capital while managing the company's cash flow. The former, needless to say, is intimately related to the latter. At Growth Street, we're aware that businesses need sufficient working capital not only for investment, but crucially to pay all the operating costs and go on doing so until receivables arrive. Unfortunately, that could be 30, 60 or 90 days, and sometimes even further down the line.

A typical scenario we've seen played out many times goes like this: a business uses a lot of it's working capital to finance fixed assets and then suddenly faces a cash crunch that prevents it from buying necessary inventory, paying suppliers or paying salaries, tax, etc. This point highlights two key wisdoms:

  • Visibility is key. Create as detailed a forecast as you can so that you always have visibility on both the timing and amount of the flow of cash in and out of your business.
  • Prepare for the tight squeezes with a fitting financing solution. A revolving credit facility like a Growth Street overdraft will allow you to not hoard cash, but rather invest it when you have it. Furthermore, it grants peace of mind and the possibility to be prepared for the lean times.

Pre-empting cash crunches by raising external finance before they arise makes good financial sense. In addition, it makes even more sense when a business is growing, whereupon it will need to increase inventory, office space, salaries or other expenditures. Instead of running into a crunch that could thwart growth plans and damage your business, it's wise to anticipate scenarios like this before they happen.

However, with many small and medium-sized businesses in the UK remaining wary about approaching traditional sources of finance, chiefly for fear of being turned down and having their credit rating dented, what do you do? The UK's burgeoning AltFi (alternative finance) sector now offer a wide variety of financial products, increasing access to capital for UK SMEs. At Growth Street we've combined the AltFi sector's sentiment of increased and fair access to capital with the business overdraft's tradition and popularity.

You can find out more about your cash flow with our Insights tool.

Written on in Business Insights Borrowing