Creating a new business is an exciting adventure for any budding entrepreneur.  Whatever the reason for creating the business, whether it’s because you’ve found a gap in the market, fulfilling a need or you just want to get out in the world and work for yourself, there;s no denying that the beginning is full of ambition, hunger and desire.

Behind all of the excitement there is also a lot of challenges that need to be overcome to become successful.  Unfortunately, financial challenges are the greatest and are the number one reason for new businesses failing.

To prevent this from happening to your business, there are steps that can be put in place.  Firstly, you need to understand all of the costs of your start up and suitably price your product or service.  Having accurate financial information is also vital to success.  With this information, small businesses are then able to create and analyse financial records.

If you know the common issues then you’re one step ahead of the game.  With an understanding of these issues, it gives your business the ability to put solutions in place and avoid any unforeseen circumstances.

Accounting software is one way of making these processes less stressful, as the software will allow you to receive real time financial information.  You can then use the data to make the correct business decisions.  We will outline some of these challenges and show you how the use of software will provide adequate solutions to your problems.

 

Managing Cash Flow

Generate enough money to cover bills while making profits to to invest back into the business sounds simple enough.

In reality, this is a major challenge and getting it right isn’t always as easy as it sounds.

The aim for having a good cash flow is to nail down the balance between accounts payable and accounts receivable.  To do this, you will need to turn money spent on goods to money from customers as quickly as possible.  Accelerating this process will give you a steady flow of capital.

One way to speed up this process is to adapt your invoice process.  Accounting software is able to send out invoices automatically.  This ensures that the data is consistent and on time, as well as being accurate.  The system also allows you to see current and projected cash flow which means you analyse and adjust your process.

 

Obtaining Cash

Similarly to the previous point, some may say common phrases such as you need to spend money to make money.

This, again, is a fairly simple concept but if you don’t have money then how can you spend it?

In terms of financial challenges, securing cash is near the top of the ladder.  This means if you are struggling to get external assistance then you’re probably going to run out of cash.  Many businesses say that if they do not see revenue in the first two months of trading, they would need to secure funding or reduce their costs.

Regardless of the type of funding you are chasing (bank loans, government grants, personal loans via friends and family), knowing how much money you require is crucial to reaching your goals.  If you can easily and concisely show your financial information, then you’re more likely to receive the money you require and in a timely fashion.

Having software will provide you with access to information at the press of a button.  Statements such as P&L, cash flow and balance sheets which are auditable are a great thing to produce to banks and investors.  Additionally, the software will provide detailed financial information and can even calculate KPIs for your business.

 

Paying On Time

Making or receiving payments on time can be a stressful task.  If you are a small business with a small amount of money in the bank then you may be unwilling to part with the cash instantly.  On the other hand, if you are expecting a payment that’s not coming then you may be worrying that the delayed payment will harm your cash flow.

Just like in your personal life, it is important to pay bills on time however a late payment here and there won’t majorly impact you.  If, however, you are regularly missing payments then this can be damaging.

Late payments can severely affect your company’s financial health but, not only that, they can also damage relationships with your suppliers.  Failure to pay suppliers may then lead to a breakdown in said relationship which in turn will damage your ability to provide products or services to your customers.  Ultimately, this will lead to disgruntled and, potentially, lost customers.

An automatic payment system is one way to combat this.  This will save you time and money as you will not be subjected to any late payment fees which may occur.  Data entry errors will also be eradicated therefore this feature is invaluable to your business.

 

All of these issues can easily be avoided with the use of an accounting software within your business.  The financial headaches that many young businesses experience are therefore removed, providing you with the time and money to make your business grow.  This will reinstate that initial excitement of creating a small business and make your life that little bit easier.

At Cofficient, we can provide you with accounting software and pride ourselves in our customer support system where we will do our best to answer all of your queries.  Get in touch today and remove those financial challenges