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Creating a Healthy Financial History at Each Stage of Your Business

At every stage of your business's growth, having an organised and transparent financial history is essential when trying to securing external funding. Banks will want to see consistency across your finances, so it’s important to get in to good habits, no matter how big or small your company is.

Start Up - Build Your Financial History

As you take your great business idea and start turning it into a reality, it is likely you will need financial help to get it off the ground. Bank loans can be a great option for early stage business funding, however, it can be difficult to secure a loan when your business has little or no financial history.

To help build your business’s financial history it is essential that you register as a company, as this legally separates any personal debt you may have from your business finances. You should also open a business account immediately, ideally you should have had a one for 2 years before applying for a loan. As soon as possible, take out a business credit card to start building up your business credit history - this will make it easier to secure more significant funding down the line.

Even if you are not making a profit at this point, it is important file and pay taxes in a timely manner to ensure compliance and you should make sure that there are no discrepancies between your taxes and management accounts. Make sure that any spending you make as you build your business comes out of your business account and not your own. Keeping personal and business finances separate is the foundation of financial hygiene and will make accounting much easier as your business grows.

Scale Up - Maintain Clear Bookkeeping

At this point, your business may have grown to a point where it is making a profit but, if you are ambitious for more, it could be time to scale. As your client base and revenue grows it is crucial that your accounts are maintained well to ensure consistency across your business - and help you in securing that essential funding to take the next step.

With more activity on your business account - an increase in both revenue and expenditure - it is important to make good bookkeeping a priority. Invoices should be filed to keep track of all of your income. They should include information about the type of work you are doing, the amount paid, date finished and your company information such as registration number and address. Make sure you keep an eye on when invoices are paid, as late payments could have a negative impact on your cash flow.

On the other side, keeping track of your expenses is the easiest way to stay tax efficient, which is essential when looking to secure credit. Hold on to all receipts that relate to your company’s expenditure, including travel and equipment. You will also need to keep records of cashbooks, bank statements and wage books. The exact records you’ll need depends on your business and the sort of tax you need to pay.

SME - Hire A Professional

When your business is small and growing, your bookkeeping can probably be handled by an individual on your team, or the owner themselves. However, once you have a steady stream of clients, and a couple of employees, it may be time to hire an accountant who can help you deal with the more complex financial management that comes with SMEs. They can help you maintain a good financial history, whilst also saving you money - which will all help when it comes to applying for business loans.

An accountant can provide various services that will help your business run smoothly and your finances remain consistent. These include accounting, tax returns, pay roll and record keeping. The combination of these services will ensure you can fully monitor expenses whilst also being compliant with tax requirements and understanding where your finances are each month.

On top of these basic services, an accountant will be able to offer advice on how to grow your business effectively and ways you can reduce your tax bill, effectively and legally. They can also help you set up accounting software and bookkeeping systems, which can save you time, money and confusions when it comes to producing tax returns and financial statements. As someone that can help you improve your cash flow whilst also reducing your overheads, an accountant can be an invaluable addition to your team.

No matter how big or small your business is, transparency and consistency when it comes to your finances is key. By maintaining a healthy financial history, you become a more attractive candidate for external funding from banks, or when you’re ready for that next big step - investors!