1. Get a separate business bank account
As many startups and entrepreneurs begin their ideas as sole traders, it is often easy to start a business with a standard personal bank account. However, we recommend, even if you are a sole trader, that you have a separate bank account, in the business’s name, to keep the business transactions and your personal transactions separate.
It is essential that your business has a separate bank account once you are trading as a limited company as your book-keeping and tax returns will become incredible complicated and costly if this is not the case.
Many of the comparison websites will compare business bank accounts to ensure you are getting the best deal possible.
2. Forecast regularly
Regular financial forecasting will highlight any potential hurdles or problems which may occur giving you the opportunity to put remedial actions in place BEFORE your finances hit hard times.
Regular forecasting will also help you to make confident and informed decisions about the future of your business. Our forecasting software allows you to forecast your cash flow showing you when’s a good time to spend and how that spending could impact on other areas of your cash flow.
It shows you your financial forecasts in an easy-to-interpret dashboard via graphs and pie charts. You can interrogate this data at the click of a button to give you a better idea of the numbers that sit behind your forecast.
It is a lot cheaper to forecast into the future to see what might happen compared to paying to get out of a hole once you have hit financial problems.
3. Understand your cash flow variables
There are many different variables which have a direct impact on your cash flow and understanding what they are will help you to make better decisions about your business.
We look at the top 10 ways to better manage your cash flow in a previous blog post but the main ones to be aware of are:
- Supplier costs
- Sales levels
- Income from funding – Grants, Loans etc.
- Income from other sources (loan repayments, property income, dividends, cash interest etc.)
- Business rates
- Taxes etc.
For more information on what you need to consider when looking at cash flow forecasting, see How to calculate cash flow.
4. Improve your conversion rate
Your conversion rate is a number which is rarely mentioned to startups and entrepreneurs but which can significantly impact on the success rate of your business.
Your conversion rate is the number of enquiries or website traffic which go on to purchase or complete your required action to quality them as a successful customer or client.
Many businesses focus on increasing sales leads or enquiries but rarely do they also focus activities on increasing the conversion rate of those enquiries or leads.
Imagine your business has 1,000 enquiries per month at a conversion rate of 1%. That is 10 customers per month. If you put money and resource into increasing enquiries to 1,200 you would increase the number of customer to 12. However, if you increased your enquiries by 1,100 and your conversion rate to 2% you would have 22 customers per month.
Conversion rate increases don’t have to cost a lot of money and could be as simple as improving customer service or certain sales processes and you could reap significant financial benefits.
5. Increase the number of purchases per customer
In a similar vain to the previous point, you can increase the value of each customer easier and cheaper than you can increase the overall number of customers. This is the concept of upselling and again, isn’t difficult or expensive to implement within your business but could see you overall financial status and cash flow improve vastly, with little effort.
6. Don’t focus on profit
Using profit as a stand-alone KPI (Key Performance Indicator) can be a risky strategy. This is because there are so many other variables which show you the financial health of your business. Cash flow from operations is important and shouldn’t be overlooked, as are conversion rates and value per customer.
Your profit and loss accounts are a retrospective view of how your business has performed but it will not help you manage your business in the future. It can, however, help you to set targets for the future year’s performance.