Turnover is vanity

Profit is vanity

Cash is king

Do any of these feel like you?

• Is your business struggling to find enough funds to get you off the ground? If so, your business idea will remain just that, an idea.
• Is your business in the financial position to take advantage of all the opportunities that are open to it? If not, your business is being held back by its financing arrangements.
• Is your business being restricted by the facilities your bank will offer? If so, you’re not in control of your business, your bank manager is.
• Can your business afford to pay all its bills as and when they fall due? If not, your business is insolvent (don’t panic, but do get advice).

 

In any business, finance, the cash that is critical to your business is absolutely vital, from allowing you to start-up through to enabling you to grow, survive and thrive.

And if you have any of the above problems, you have a financing problem that you need to deal with.

Cash is the lifeblood of your business and knowing how to raise it, manage it, and use it efficiently and effectively is as vital to your business as knowing how to make and sell your products, because if you can’t manage your cash and finances then either you may not get the chance to run a business in the first place, or you might one day even lose it all.

However, financing a business, by which I mean both raising and managing the cash that is both:

• generated inside the business; and
• introduced into the business from outside

 

is an area that many business owners shy away from for reasons that are quite understandable.

It’s an area that is obviously ‘financial’ and driven by ‘numbers’; but ‘numbers’ are things many people feel uncomfortable dealing with. As a businessperson you probably did not go into business in order to juggle figures or interpret accounts, but rather to be able to make and sell your products and develop your firm.

Finance and accounts are often seen as complex issues where you require professional guidance on the issues involved and the options open to you. It’s also an area where as a smaller business you are very often dealing with very large businesses such as banks and other financial institutions, where it can feel at times that they hold all the cards.

The good news is that this book is on your side. It has been written for the owner managers of small and medium-sized businesses.

The purpose of this book is to help you as a business owner:

• understand how much and what sorts of finance your business needs (and why);
• identify what options are open to you when it comes to raising this finance; and
• choose the most appropriate form of finance for both you and your business, on the most appropriate terms.

 

To do so, this book is dedicated to making this area of management accessible and understandable to every business owner.

Financing a business inevitably involves looking at financial matters, which includes having some understanding of accounting and accounts, what they are, how they are put together and what they can tell you. But rest assured you do not have to be an accountant in order to understand accounts.

This book will show you how to pick out the key details and how to use the information in your business’s accounts to help you understand and manage your business and its finances.

Finance, like any other area of business, has its own jargon, shorthand, abbreviations and TLAs (three letter acronyms) that those in the profession use, but which often act as a barrier to exclude those not in the know. This book will explain the meaning of terms like ‘gearing’ and ‘liquidity’ in plain English as they arise in the text and these definitions are repeated in the glossary at the end of the book. It will also show how concepts such as security work in practice. This will help you to manage your relationships with financial professionals and advisers by showing them that you know your ‘assets’ from your ‘LBO’ (leveraged buy out) and can talk to them in the language that they understand.

Unfortunately you will find that some words such as ‘capital’ can have a number of related but slightly different meanings depending on the context. Where these differences are important I have tried to make this clear.

It is also true to say that this is not designed to be a corporate finance textbook or academic exercise in accounting theory, so the definitions used will be down to earth and aimed at providing non-accountants with useful day-to-day tools.

In order to make this approach as straightforward as possible, this book is divided into three sections.

A: Understanding Your Business’s Finances

The starting point in the first section is understanding your business’s financial needs; how to manage these by managing the funding generated internally within the business and its requirement for external finance; and the issues to watch out for in respect of raising any such finance.

If you are familiar with accounts and financial issues you may wish to skip this section and concentrate on the more detailed information in the subsequent sections.

B:The Sources Of External Business Finance

The middle section provides detailed information on what many people will think about when they think about finance, the different sources of external funding that may be available for your business, and how to go about raising these.

As finance is an area where things can change rapidly, this section will not attempt to give chapter and verse on the specifics of what is currently available, as this type of information will soon become out of date. Instead it will give you an understanding of the main types of finance that are available, the principles that underlie how they operate and information on how to access the relevant sources.

C: Specific Financing Situations

The last section provides a series of detailed briefings on the issues surrounding the financing of some specific types of business situations such as a start-up, an acquisition, property development or a turnaround.

While these chapters are written to be stand alone briefings they will tend to assume some familiarity with the concepts covered in the previous sections.

So, if you’ve ever wanted to say bye-bye to your bank manager, this is the book for you.