It’s important for business owners to stay on top of their finances to help drive their business forward. We caught up with Caroline Dunn, finance director at BCRS Business Loans, for some useful tips for you to consider as we enter the new financial year.

Forecasting

For small businesses, looking to the future is incredibly important in order to assess how your business can grow. Creating forecasts and budgets is an important step for you as a business owner to be able to plan ahead.

With this in mind, we hear you asking, “where do I start with the forecasting process?”

First of all, there are a few elements you need to consider when putting your forecast together…

• Ensure you are familiar with the market your business operates within to assess trends and growth potential
• Keep track of customer orders. From regular customers to those one-off purchases, every single order is important
• Being able to react to changes: The economic environment is ever-changing and sensitising your budget (leaving ‘wiggle room’ in your budget) so you are able to adapt to market changes is essential. Most recent examples include labour shortages, the fuel crisis, and the increase in National Insurance
• When putting your forecast together, ensure you are realistic in your predictions and that they are measurable so performance can be reviewed and easily monitored for positive and negative variances
• As for all situations, ensure you have a contingency/back-up plan for any unforeseen circumstances, where feasible.

Cash flow

Another important factor to consider when driving your business forward is understanding your cash flow.

A cash flow forecast will help you identify the pinch points and give you a good indication to where you can enhance/improve your cash flow. A couple of things to take on board as a minimum is:

• Ensure timely invoicing and cash collection. To manage this efficiently my top tip would be to ensure you check cash collections weekly or monthly depending on the frequency of cash receipts and wherever possible negotiate to have suppliers on longer payment terms than your customers. This is not always possible if you are a start-up and building a credit history. But always re-visit after the relationship has grown
• Monitor your debtor book regularly and act quickly if payments are missed.

Click here for some top tips for what to include in a cash flow forecast.

Research and Development Tax Claim

Following the spring statement back in March, making use of the research and development (R&D) tax claim offered by the Government is something many businesses, especially SMEs, fail to do. In financial year 2019/2020, 81,530 SMEs made an R&D tax claim and only 7,095 (8.7%) of these claims were made by SMEs in the West Midlands.

You can claim R&D tax relief if you’re a SME with:

• less than 500 staff
• a turnover of under €100m or a balance sheet total under €86m

As an SME, you are eligible to make an R&D tax claim to support; developing new products, processes, or services; or enhancing existing ones.

Some costs you can claim for are:

• Employee costs
• Subcontractor costs
• Software
• Consumable items
• Clinical trial volunteers

Making use of the scheme enables extra cash to be brought into the business to aid business growth. Speak to your accountant about making an R&D tax claim. For full details of the scheme for SMEs click here.

Can BCRS help you?

BCRS Business Loans is committed to supporting SME businesses across the West Midlands that do not tick all the boxes at traditional lenders.

We offer loans from £10,000 – £150,000 to support your business’ growth and recovery following the pandemic.

Click here for more information.

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@BCRS Business Loans