Improving Financial Performance

Improving financial performance is a concern for every business, no matter the size or type of business you have. Most people will see a lack of funding as the biggest issue, but there are other factors you should be aware of when dealing with your business’ finances. It isn’t enough to have the right amount of money to achieve your growth – you should consider of financial management and how it can ensure you don’t overspend and your business remains stable. With a clear understanding of your money, achieving goals will become easier for you to handle. So, get in touch with the York, North Yorkshire and East Riding Growth Hub and we can point you in the right direction to find the relevant funding support.

Overview of Financial Management

Money is often what holds a business together. You need it to pay your staff, buy the materials to create your product, spend money on a premise etc. In short, you need it to make your business successful and if you’re looking to improve your financial performance, it’s even more important to have a clear understanding of your money.

By staying on top of your financial management, you’ll be less likely to come into funding trouble and need extra support. The time you might have spent trying to access funding can then be used elsewhere.

If you’re still not convinced that financial management is to improve financial performance, then take a look at some of the benefits:

Sometimes business goals can depend on that one vital component – money. Do you want to take on more staff? Are you looking to expand overseas? You’ll need the right finances to be able to achieve these objectives. By having a clear understanding of your business’ figures, you’ll be able to see how realistic these next steps are. You might discover you’re wasting money and need to cut back to find external funding support.

If you’re not careful and don’t keep an eye on the management of your business’ finances, then you run the risk of getting carried away. You want to improve your financial performance, not jeopardise it and financial management can help ensure this.

By continuously updating your financial management, you’re likely to spot problems early on. This way, you can make sure they don’t become a persistent issue further on down the line.

Even if you’re selling a lot of your products, bad financial management can still negatively impact your business. There is a lot of data involved in financial management and, if you’re not sure how to approach this, an expert is worth investing in. So, give the Growth Hub a call and we can point you in the right direction. For example, we can introduce you to the Manufacturing Growth Programme, which is a grant to cover some of the cost of a consultant and they’ll put you in touch with the relevant experts for your issues.

Managing cash for growth

If you want to grow your business then you’ll likely need to spend some extra cash compared to what you usually spend on a day-to-day basis. The first question you should ask yourself is do you have the necessary funding to achieve this?

Your cash flow is important in deciding whether your business is ready for growth. By understanding your cash flow, you’ll be able to ensure business stability and be certain that you have the funds to invest in your growth. If not, you’ll know that you need to put some time into getting further funding support, whether that’s through traditional lenders like banks, or alternative finance such as crowdfunding or peer to peer lending. Getting the banks on your side, or an alternative financial institute will require you to be up-to-date on your financial management.

Cash flow is the movement of cash in (from selling your products/services) and out (paying for materials, staff etc.). You want to have a positive cash flow, as this means you’re earning more money than you’re spending.

At the York, North Yorkshire and East Riding Growth Hub, we’re available to listen to any concerns you might have on handling financial management, and put you in touch with the right support systems. A consultant would be useful here and the Manufacturing Growth Programme can support you with the funding burden.

Financial forecasting and budgeting

To improve financial performance, you’ll find financial forecasting and budgeting useful, as you’ll be able to determine short and long term financial goals. By planning, you’ll be able to outline your business’ financial direction and see if growth is actually possible and is likely to happen during the year, so you can act accordingly. Don’t skip this step, otherwise you might not notice whether or not your income is sufficient to meet goals. This will help to prevent overspending and instability within your business.

You aren’t legally required to do this financial planning, but it could ensure your business is resilient and able to manage necessary costs. So, budgeting and forecasting should be a top priority for you. Budgeting is a financial plan for a set period of time, which keeps track of how the overall plan will be executed month to month. There are two types of budgeting: zero-based budgeting and incremental budgeting.

Zero-based is when you start from a blank page, or a ‘zero base’ and all income and expenditure will be considered. With incremental budgeting, you start with a budget from the previous period (if you have one) and adjust where necessary – this enables quick forecasting. There isn’t a one size fits all - both type of budgeting have strengths and weaknesses, so pick the one you feel most comfortable with.

Forecasting should be involved in your business plan, so you should already have that up and running. Plus, if you keep on top of your finances, you won’t have to waste time in the future applying for further funding. Instead, you’ll be able to invest time in more useful areas of your business.

If you’re in doubt, then ask. Let the Growth Hub know your problems and we’ll guide you to the right programmes that can help keep your finances on track.

Management Accounts

If you’ve ever struggled with understanding your financial position and making informed decisions, management accounts might be what you’ve been missing. Management accounts is a set of accounting data (e.g. balance sheet, cash flow, income statement) that is presented for a firm’s management. By providing key financial information, managers will be able to make short term decisions easier and improve financial performance.

Some of the benefits of management accounts includes:

You have no legal requirement to do this, and different businesses will have different management accounting needs, depending on the business areas that are important to them. But, it is worth considering as management accounts will help you to make informed decisions based on objective data. If you’re based in the York, North Yorkshire and East Riding area, get in touch with the Growth Hub as we can help you find funding to cover the cost of consultancy support.

Increase revenue streams

Selling more of your main product to new customers isn’t the only option you have to increase revenue streams and improve financial performance. Look at the products that you already have and see how they’re performing. You can build on past successes and create new products instead to sell to your existing markets. It’s easier to build upon current clients, rather than find new ones, because you’ve already built up trust with them, so this will save you time and effort. You could expand on what you already have through upgrades, bringing a new, innovative approach to your product or even items that will compliment your existing line.

There is a range of support available which you might not even be aware exists. So, if you want to design a new product, you might need help from a consultant which the Manufacturing Growth Programme could provide funding for. This new product may need new machinery, then Product and Process Innovation could be useful to you. Equally, skills funding support programmes could come in handy to train your employees on the new technology. A lot of the programmes complement each other and are available to businesses based in York, North Yorkshire and East Riding, so have a chat with the Growth Hub and we can find out what could support you most.

Financial modelling

Financial modelling creates potential real world financial situations, which will allow you to forecast the future earnings of your business and improve financial performance. You’d usually do this on a spreadsheet, as the spreadsheet language allows you to reconstruct most cash flows or revenue streams. Financial modelling could really benefit your business, as you’ll feel more confident in your goals by looking at a range of potential ‘what if’ scenarios. An added bonus is that you can even test these different situations without constantly rebuilding the model.

Not sure where to start with financial modelling then get in touch with the York, North Yorkshire and East Riding Growth Hub and we can introduce you to the Manufacturing Growth Programme, which is a grant scheme to cover some of the costs of consultants.

Conclusion

You need to keep on top of managing your money to improve financial performance, as this will better support your goals for growth and any potential improvements to your business. Without a clear understanding of your figures, you run the risk of overspending and creating instability for your business. Don’t let it get to that point – speak to the Growth Hub and we’ll point you in the right direction for funding support that’s aimed at businesses based in York, North Yorkshire and East Riding. There are lots of great programmes available to you, from revenue grants to help you get independent advice, to free training sessions to help you and your staff manage your finances more efficiently.

If your interested in finding our more then you can get in touch at support@howsbusiness.org