How Virtual Finance Can Stop These Common Business Mistakes

Financial management is essential for every SME business, if you do not know what money you are making or how much cash you have, then you will struggle to make decisions. It can be overwhelming as there is always so much to do as a business. Every start up should initially onboard a bookkeeper and accountant, to take care of the basic transactional work, but then as your business is growing you will start to need more support such as forecasting how much profit you want to make, managing cashflows and taxes, keeping track of your KPI’s and reviewing trends of business performance. Fortunately, there is support, a virtual finance department is a team of specialists who will be knowledgeable on your industry and not only be able to help you manage your finances but also how to overcome operational challenges that will improve financial performance.

Here are the most common mistakes by companies that can be avoided through virtual finance.

Slow and unreliable bookkeeping

Every business needs to keep track of their profits and cash; however this is impossible if you do not get the basics right first. Bookkeeping is one of the most important parts of finances, as it becomes the information you use for your decisions. If you have inaccurate or ‘messy’ bookkeeping then it will mean you can’t trust the information your system is providing and it can mean you are unable to make accurate and real time decisions.

virtual CFO working on bookkeeping
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Lack of tax planning

Tax planning is essential to any good business finance plan. It is crucial to minimise tax costs and maximise tax relief. If you are a newcomer to business ownership, it is easy for you to overlook the importance of managing your finances thoroughly, so tax planning may be low on your priority list. However, this can have serious consequences for your business. If you fail to manage your finances effectively, you may face penalties or even prosecution by HMRC. Virtual finance ensures your business is running in compliance with tax policies and that you pay the right amount of tax to HMRC at the right time.

 

Tax planning should be considered at the outset of business planning and not left until the end of the year when it may be too late to take action or make changes with respect to paying taxes. It is important to have an expert guide you through this process so that you can focus on running your business rather than worrying about HMRC payments or whether or not your company will qualify for certain grants or other financial benefits available under current legislation such as tax credits/allowances or development funding schemes.

No cashflow planning

Not collecting money on time and the delayed accounting of transactions can result in a domino effect of additional pressures — this includes not meeting your payroll costs, supplier payments and any bank loan repayments. 

 

One of the key issues with building cashflows is the accuracy of customer payments. As a virtual finance department, we build collaboration with the operations of a business, so that we support with managing cash collections. This includes reducing debtor days but also thinking about cashflow upfront when new customers are onboarded.

 

If you are making decisions based on the ‘cash you have today’ then this can seriously be hindering your future growth, either you can be using cash which is already reserved for tax (and if not planned causes stressful situations) or you can delay paying for key services, that you need to grow. Therefore it is important that cashflow planning is managed weekly so you look ahead and make informed decisions.

virtual cfo identified growth opportunities

Missed growth opportunities

If you do not receive important information regarding your accounts in time, this could lead to poor timing where you overlook opportunities you should have taken advantage of. Additionally, financial threats may go under the radar so you are unable to resolve them until it’s too late. Utilising virtual finance, or hiring a CFO, will help you plan your financial strategy. It is important that your finances align to overall business plans, and a skilled finance team will help you plan, manage risks, improve profitability and support business growth.

 

Our CFO’s will help you manage you financial strategy, this will include things such as how to improve cash coming into the business, strategies to manage cashflow including highlighting risks and helping restructure debt portfolios, forecast profitability, implement and report on relevant KPI’s, work with operations and other areas of the business to ensure finance becomes a culture of the business.

No reporting and KPI management

Every business must manage their key KPI’s effectively. This means the core things that keep your business running effectively must be measured, including things such as profitability (rather than just sales), working capital ratios such as debtor days (how quick you get money into the business), Leads required to generate sales, Return on investments and other non financial information such as time spent on projects, lifetime value of customers etc. If these things are not measured, then business owners find it hard to make decisions, or they will make wrong decisions as they will not be utilsing specific data on what is working, or what is not working.

 

A virtual finance department can support by helping you plan your financial strategy alongside your business model, identify the KPI’s required to keep the business running effectively, manage your bookkeeping in line with how you need to see information, help build relevant report to keep track of non financial data, Build KPI and management reporting and work with your teams to help them become financially literate, understand how to use the data to make decisions so you can feel confident your business is growing effectively.

Wilkinson Accounting Solutions are experts at virtual finance with decades of industry experience. Our team of qualified and skilled accountants will work with you as your virtual CFO and finance team . As part of our service, we can provide professional bookkeeping support as well as strategy planning, cashflow forecasting, KPI management, tax reporting, operational reviews and process mapping, monthly shareholder packs for investors, and pitch decks for funding opportunities. As every business is unique, we tailor our bespoke packages according to your specific goals and requirements.

 

 Contact us today to see how our discovery sessions can help your business grow.

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