Financial management for the growing business

Your business may have been established for a number of years and be ticking over nicely, but what would happen if your order book were to expand rapidly and cash flow become an issue? If you have a robust business plan in place you should have sufficient warning to enable additional finance to be raised without a lack of working capital becoming problematic. If not, you may be unable to take full advantage of the opportunity to expand and become more profitable. Even worse, the survival of the enterprise may be at risk if sources of finance cannot be found to cover the cost of materials and labour. Countless companies have been forced to close simply because they ran out of cash despite the fact that they had full order books.

No matter how large or small the company, effective financial management is essential if an enterprise is to succeed and avoid the pitfalls that might otherwise catch it out in periods of growth or, for that matter, recession. One way to ensure the correct financial controls and strategies are in place and to gain access to additional funding is to contact companies such as private equity firm AnaCap for advice on which is the most suitable option in your particular case. As long as you can demonstrate that your company has the potential for sustained and significant growth, there should be little problem in attracting suitable investors.

The various forms of equity finance include venture capitalists who, in return for a minority stake in your company and a place on the board, will provide not only an unsecured cash injection, but also financial expertise and invaluable trade contacts. Another possibility are business angels, which can be either organisations offering their members a stake in a selection of commercial enterprises, or wealthy individuals. Angels provide mentoring and expertise and tend to have an in-depth knowledge of the sector in which the companies they invest in operate. Banks may also be prepared to offer equity investment. A key advantage for some business owners is that they do not play any role in the day to day running of the company. On the downside, one of the problems with any equity finance option is that it can take as long as 18 months to put into place.

Your bank may be prepared to offer funding in the form of a short or long-term loan, although in the current economic climate they may be reluctant to provide a significant amount. What’s more, bank loans tend to be expensive and regular repayments will be required.

In addition to the financial challenges faced by any growing business there are several other potentially significant issues to address. For example, there will inevitably come a point where your existing premises can no longer cope and you will be faced with either relocating to larger premises or expanding your existing workspace. Either of these options can be extremely time-consuming and expensive, so planning ahead is essential. The second major challenge relates to taking on additional workers. It is almost inevitable that recruits will require training, which is likely to involve existing hard-working staff being taken away from their day-to-day tasks to act as educators. It is, therefore, desirable to plan your recruitment strategy well in advance.

Whilst growth inevitably brings with it new challenges, the rewards, in terms of increased profitability and the satisfaction of seeing your company succeed, are sure to more than make up for the effort required.