Link to part 1

I think the best way of beginning this article will be to firstly cover a few points raised from some comments received on a few of the groups on LinkedIn. The main point that I would like to cover would be the order at which the points were placed in the first article. The order in which the points were placed was never meant to depict the order that you should actually going about doing things.

As with most articles that are similar in nature to this ‘How-To’ guide. The points were more of a way to create a checklist for yourself and hopefully point out one or two things that you may not have actually realised. Remember, it is your Business, your idea, your product or service – these series of articles are, are a resource to help you. It is you that ultimately makes the decisions and decides on the order of things.

Anyway, I hope that has cleared that little bit up.

In the previous part of this series, the areas that we covered were: Plan, Brand & Identity and Sales & Marketing (This can be found here ). To continue on from that, in this article we will be looking at Accounts Systems, Forecasting Sales/Profit/Loss and Budgets.

Accounts Systems

As you can appreciate, there are a plethora of systems available out there. The one that most will have heard of is Sage. Just to set out our stall here, this is not going to be a review of systems – we are just going to focus on what is out there and the feasibility of it for your business. Most (if not, nearly all) accountants will recommend that you go for the online suite from Sage when first starting up (https://shop.sage.co.uk/). This is predominately because Sage has been around for years and years and years. It could even be fair to say that many accountants have been trained in its sole use. At the time of writing this article, Sage currently have a 50% offer for the first year’s subscription, which equates to £2.50 per month, per product (after the offer, this goes up to £5 per month and prices are +VAT). Well, what can be fairer than that? Monthly nominal cost, full accounting system… what’s not to like? Truthfully, not much. Sage does exactly what it says it will do – it is a system that helps you manage and maintain your accounts and payroll. However, there are additional add-ons that you may need to purchase dependant on your business activity and size… so do ensure that you have all of the facts and can be 100% on your product choice with them.

So that’s that then? Well actually no it isn’t… There are many other systems that are available for you to use that can do just as good a job as Sage, but that come with smaller price tags and in some cases better functionality. The rivals to Sage tend to be online solutions, which (and this is purely a personal preference here) tend to work much better for SME’s. The reason being is that with them being a full online solution, you can access your accounts anywhere, you can provide your accountants instant access via a login and clients can also have log-ins to be able to pay their invoices online. In addition to this there are even some systems that are completely free to use and only charge you when your business grows – should you need to upgrade.

So to follow, here are the names and links to the top three challengers (after this brief bullet point we will highlight which we believe is the better out of the three):

• Kashflow (from £5 per month): https://www.kashflow.com/
• XERO (from £5 per month): https://www.xero.com/uk/
• Quickfile (From FREE): http://www.quickfile.co.uk/

Out of the 3 mentioned above Quickfile for us, sticks out above the rest. Whilst their own website is not as polished as the other 2’s the functionality and UI really do win out. Whilst it may appear basic in its appearance, there isn’t anything that it can’t really handle. When you couple that with the fact that you don’t get charged at all for the use of the system until go over 1000 ledger entries… it’s a winner! You may be wondering what the cost is after that 1000^th entry? £45 +VAT per year… that’s it.

Again it needs to be made clear that this is only our preference. Each system or suite offers differing functionality, different interfaces and different costs. You need to ensure that the option you decide on is right not just for you but also for your business and your wallet.

Forecasting Sales/Profit & Loss

This can sometimes be where most will falter. The reason being for this is that the passion for the idea can override rational panning and thought. It is extremely important to weigh up the financial aspects of what you are proposing to do. We appreciate that most are prepared to sacrifice any form of profit for the first year or few in order for the business to gain momentum. However, and even if that is the case for you, profit does have to come from somewhere – it would be impossible to run a business at a loss indefinitely (national governments excluded).

You need to set targets for sales in order that you can gauge the businesses growth over time and its projected expansion. This is vital and cannot be a part of your plan that is overlooked. Without knowing what you need to do on a month by month/year by year basis you cannot realistically ensure that growth happens. Yes, it may well add to the stress of running a business, but unfortunately stress just comes hand in hand with that. Even if you only want to ‘get-by’ you can’t do that when running at a loss. Forecast your sales and you will be able grow or maintain a level of business that keeps you happy.

As has been previously mentioned – many reside themselves to the fact that the business may well make no profit for the first few years. However, that doesn’t have to be the case if you get your forecasting and methodology in place. By objectively setting your projected sales against your projected expenditure/loss, you will be able to see where increases are likely to occur overtime and possibly even be able to bring forward profit growth much earlier than expected.

Just as sales will build your company, un-forecasted losses and expenditures will bring it down. Don’t, for one second, think that projected losses are any less important than forecasting your projected sales. If you do not factor them into your business plan, when they occur they will hit you a lot harder than you would like. Think of it like this all those wonderful sales are pouring through the door and you are enjoying a sales boom, so automatically you push more money into sales to increase your company’s activity and growth. All is going well and then all of sudden you hit a dry spell, virtually no orders or sales are coming in yet your expenditure maintains at the level it was when everything was rosy.

All of a sudden your profits start to get eaten into. This happens when you haven’t researched the industry well enough and have not forecasted for industry wide peaks and troughs. The peaks are great but you have to forecast the troughs… Virtually every industry has them throughout the course of the year, for many April is that time of year as it calls an end to the financial year so spending is generally restricted.

No-one is suggesting that you will be 100% accurate in forecasting, however by completing it thoroughly you will have been able to identify targets, goals, industry peaks and troughs etc. Essentially giving you a visual representation as to how your business should perform in the coming years. It’s not set in stone, so we would recommend consistent review and changes dependent upon company performance.

Budgets

From your forecasting you will be able to define budgets to be set in order to be able to achieve your forecasts. These can be marketing budgets, sales budgets, expansion budgets, running costs etc… It really is down to your particular business to identify areas within it that should have set budgets. It is incredibly important to stick to these budgets as overspend in one area will mean an underspend in another. Overspending in all areas will result in a drop in profits and could lead to cut backs. Whenever you look to either increase or decrease a budget set for a particular area of your business, it is vital that you do so only after looking at and adjusting your company forecasts.

Budgeting correctly will make running your business a whole lot less stressful and will allow you to see returns sooner.

As you can tell within this part of the series, we are really summarising some of the key financial aspects that need to be taken into consideration. Is this all then? Hell no! depending on your business type/size/service areas there could be a whole lot more… or less. The key is to remember that whatever your venture, regardless of its similarity to that of its competitors, your business is unique to you and should be run as such.

This particular financials section aim is to promote some serious thought and consideration when looking to start-up. Your passion and drive will push you but it will also make you overlook the basics (it happens every day to some of the best out there). You have to remember that in business your heart will get you so far but it’s your head that will make the ultimate difference.

Part 3 to come along soon read part 1 here, but in the meantime do please let us know your thoughts and comments on this series so far. As you can see from how this one started, they will influence future posts. That aside we are always interested in what you have to say… look forward to hearing it.

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