6 Finance Function Basics for ScaleUps

You’ve set up a business. You’re starting to grow and you are ambitious to scale-up further. You want to stay on top of your finances without going over-the-top.

What are the basics that you need to put in place to be confident in your finances and be able to convince others to invest in you? This is my list of essentials:

1 Have Confidence in Your Core Business Model

This confidence comes from knowing that you will reach a reasonable level of profit when your business is trading normally. By “normally” I mean when your business has reached a defined level of maturity. Many businesses will trade at a loss during their initial growth phase when up front investment is made and sales volumes have yet to reach mature breakeven levels. At some point, however, income needs to exceed expenditure and the business needs to make a profit. Confidence that this will happen requires clarity and quantification of:

• Likely sales volumes: don’t be over-optimistic, a common mistake.

• Prices that will be achieved: again be realistic and clear.

• Variable costs that depend on sales volumes.

• Fixed costs: that remain the same at different sales volumes although may step up at certain points.

• The relationships between all of the above at different levels of trading. All of the above needs captured in a financial model.

2 Have a Clear Purpose, Plan & Focus

Successful businesses have a clear sense of purpose: they know what they are here to do. They understand where they are trying to get to and how they are going to get there. They do not think through every detailed step along the way, (this is usually not worth it as things change rapidly), but they will have worked out enough of the steps and options so that their managers can make effective decisions and give confidence to those they are leading.

They are focused. They will know the <3 things they need to do now to take the biggest steps forward.

3 Know Where You Are

To make the right decisions to move forward you need to know where you stand now. You need regular up-to-date information about your financial position produced quickly including:

• monthly profit & loss (aka income & expenditure).

• monthly balance sheet.

• analysis of profit by customer, project or customer segment (probably an estimate, but estimates are fine).

4 Secure Sufficient Funding

Businesses can carry on running at a loss or at a profit as long as they have cash. To be in control of this it is vital to:

• keep a good cashflow forecast up-to-date.

• understand available funding.

• project income and expenditure based on the current financial position.

5 Comply 

All UK-based businesses of any size need to:

• file payroll returns with monthly PAYE & National Insurance payments.

• file VAT returns & payments.

• file corporation tax returns & payments.

• file annual accounts with Companies House.

• keep adequate well-ordered accounting records and audit trails.

These are the compliance basics. Depending on the type of organisation you are and where you trade, there maybe others.

6 Take time to step back

To stay in control it is important that the management team take time regularly (probably once each month) to:

• check where they are.

• confirm that their destination is still the right one.

• adjust course.

During this review time they need to be completely honest with themselves, realistic and ruthless in prioritising what is important.If you ensure that you have these 6 things in place, you will have placed solid financial management foundations from which to scale your business.

Please get in touch if you have any questions or you would like to find out how Bellevue Partners maybe able to help you develop.