The real fundamentals of finance! An interview with Plus Accounting
We recently hosted our first High Growth event of 2019 on the real fundamentals of finance. Our four panellists shared what, in their experience, the real fundamentals of finance are, as well as advise on business forecasting, how to engage your team (and yourself!) on the financial side of things, and what goes into valuing a business. We caught up with our High Growth event sponsor Plus Accounting to find out their views on the topic.
Our High Growth event was all about the real fundamentals of finance, and how these aren’t necessarily what you’d expect. As experts in tax and accounting, what would you say is the most fundamental aspect of business finance and is it a surprise to most business owners?
In my opinion, the most fundamental aspect of business finance is cash flow and although most business owners are aware of its importance, it can quickly become a problem if owners do not pay enough attention to managing their cash flow. It is vital to forecast cash flow for both the short and long term and to regularly check the movements against the actual bank balance.
Our High Growth panellists have all taken an alternative approach to their business finances. Have you taken a different approach to finance at Plus Accounting?
At Plus Accounting, we have taken the standard approach of managing our funding with the help of a bank overdraft facility. However, our funding requirements are modest because we have monthly payment plans in place with a large number of our clients, which helps our cash flow and reduces the need for external funding.
Plus Accounting does a lot of work with business owners on valuing a business. What are your top tips to business owners if they’re considering exiting or selling their business?
If an owner is selling their business, I have two tips. Firstly, make sure that your business is ready for sale, which means undertaking all of the due diligence that a purchaser would undertake. For example, ensuring that all legal, tax, HR and operational requirements are up to date and legally compliant. The second suggestion is about timing. Most businesses operate in cycles and it is vital to choose the right time to sell. Ideally, you would wish to sell a business as it approaches the top of a growth or profit cycle so that you can demonstrate good past performance but also show the purchaser that there is more sales or profit potential.
Our panel discussed the importance of future-gazing and forecasting- how do you help your clients prepare for the future, especially in such uncertain times?
We help our clients prepare for the future by encouraging them to plan ahead. By preparing profit and loss projections and cash flow forecasts, it requires them to think carefully about their costs, how much turnover is required to cover those costs and the timing of the cash flows. A monthly comparison of budgeted to actual results will show whether their predictions are accurate and realistic.
Thank you to Paul for writing this blog, and to Plus Accounting for sponsoring our High Growth series.