Clever Financial Moves: Unleashing the Potential of Your Emerging Enterprise

Last Updated: 

November 23, 2023

753,168 new businesses were launched in the UK between March 2021-2022 – the second-highest total on record. Additionally, one in five small to medium-sized enterprises (SMEs) achieved growth within in the past twelve months. Once your new business is up and running, you’ll likely be looking for ways to take your operations to the next level. However, growth can be slow or altogether impossible without effective financial management strategies in place. Financial management can allow you to maintain a health cash flow and expand your operations accordingly.  

Key takeaways on clever financial moves

  1. Reconsider your business structure: Assess if your current business structure is still suitable and make necessary changes to improve management and facilitate growth.
  2. Invest in the stock market: Consider investing business profits in a diversified portfolio of stocks and bonds to generate long-term returns and manage risk.
  3. Implement effective cost management strategies: Analyse business expenses, reduce costs without compromising quality or productivity, and adopt cost-effective technology solutions.
  4. Develop a robust financial forecasting and budgeting process: Use financial forecasting to anticipate challenges and opportunities, set realistic goals, and create a comprehensive budget for effective resource allocation.
  5. Prioritise credit control: Assess the creditworthiness of customers, run credit checks, and implement contract conditions to ensure timely payments and avoid bad debts.
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Reconsider your business structure

The business structure you first chose when starting out may no longer be the best fit for your current needs. Outgrowing your business structure can potentially result in a host of unwanted issues – for example, you may be paying more tax than you really need to, unnecessarily increasing your exposure to risk, complicating your administrative duties, and hampering your ability to access finance. So, take time to reassess your legal structure; changing it may improve how you manage your business, and better facilitate growth. So, for example, if you initially started out as a sole trader due to the simplicity offered by this structure, you may now want something that offers personal liability protection for extra peace of mind. 

Invest in the stock market

Investing your business profits in the stock market can be an effective way to generate long-term returns – however, it’s important to consider your individual goals and tolerance for risk to ensure you make the right investment choices for you. In particular, financial experts recommend creating a portfolio consisting of 60% stocks, and 40% bonds; this ratio essentially allows you to benefit from the stability of bonds, along with the growth potential of stocks. A 60/40 strategy is easy to implement, and minimise your risk, while also generating moderate returns. By taking care to monitor where your money is invested, along with the fund’s overall performance, you can be sure your chosen investment strategies are working for you.

Before diving into the stock market, it's crucial to thoroughly research and understand the companies you plan to invest in. Additionally, using tools and resources that offer stock real-time data when investing in the stock market is essential for making informed decisions, analysing market trends, and maximising the potential for profitable investments. This can be supplemented by in-depth analysis of your trading history which can be done with an income trading stock report.

Implement effective cost management strategies 

As your business grows, it becomes crucial to implement effective cost management strategies to optimise your financial resources. Conduct a thorough analysis of your business expenses and identify areas where you can potentially reduce costs without compromising quality or productivity. This could involve renegotiating contracts with suppliers, seeking competitive pricing options, streamlining operations, or adopting cost-effective technology solutions. By actively managing your costs, you can improve your profit margins, reinvest the savings into business growth initiatives, and ensure long-term financial sustainability.

Develop a robust financial forecasting and budgeting process

Financial forecasting and budgeting play a vital role in helping you plan for the future and make informed financial decisions. By developing a robust forecasting process, you can estimate your future revenue, expenses, and cash flow, enabling you to anticipate potential challenges and opportunities. This will also allow you to set realistic financial goals and develop strategies to achieve them. Additionally, creating a comprehensive budget will help you allocate resources effectively, prioritise investments, and track your financial performance against the set targets. Regularly reviewing and updating your financial forecasts and budgets will enable you to adapt to changing market conditions, make necessary adjustments, and stay on track towards your financial objectives.

Prioritise credit control

A credit control system plays a key role in helping your business maintain a healthy cash flow. It essentially involves assessing the creditworthiness of potential customers to maximise the likelihood of you being paid on time. As a result, you can better avoid being left with bad debts. Not only can being owed money mean you may not have enough cash on-hand to pay bills, suppliers, or employees, but it can also prevent you from investing in growth opportunities. So, always run a credit check before entering into any new contracts. While a low business credit score doesn’t mean you have to reject a customer outright, you can better protect yourself by issuing certain contract conditions, such as, demanding either partial or complete payment before completing any work. 

The right financial management strategies are key to growing your new business. By reconsidering your business structure, investing in the stock market, and prioritising credit control, you can better set your business up for continued long-term success. 

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