How Can Small Businesses And Startups Secure Their Finances As They Begin The Coronavirus Recovery?

Even under normal circumstances, small businesses and early-stage start-ups face a unique set of financial challenges, and the coronavirus crisis continues to cause issues for growing businesses. Although the government recently announced as part of its winter economic plan that over one million businesses across the UK that took out Bounce Back Loans and CBILS will have greater flexibility in repaying them, this is a stopgap for most small businesses rather than a solution.

Managing the company books isn’t glamourous, and it’s not the reason most people start businesses, but no business can succeed without a stable financial foundation. Fortunately, it’s fairly straightforward for small businesses and early start-ups to establishing financial processes and procedures that make dealing with finances as painless as possible while still giving staff the freedom to make necessary purchases.

Taking the time to plot out the business’s financial infrastructure from day one also serves a range of other goals, including making it easier to streamline and identify issues when something seems off. It’s a chance to plan ahead and design a system that will scale up with the company as it grows. Here are some things that small businesses should consider.

Consider whether your fundamentals are fit for the future

Every business, no matter how small, needs a bank account, a way of paying staff and a system for managing finances. The bank account is the simplest consideration of the three, but it’s still worth considering whether the features and rates of your company account are suitable for your business’s growth goals.

As for payroll and accounting, there are plenty of competent tools to choose from. For payroll, be sure to choose an HMRC-approved software option that suits your business’s current and near-future needs. For accounting, many banks offer basic money management features, but these are extremely underpowered for use in a business context. Instead, invest in a proper accounting solution, ideally via a cloud-based platform. This option is increasingly popular – for obvious reasons in the time of coronavirus – and generally more capable. Many accounting platforms even offer up-to-the-moment financial data about your business. For both accounting and payroll software, be sure to consider the number of licenses you will need both now and if your growth plans are successful a few years from now.

Adopt modern solutions for rapid data responsiveness

Small businesses face the constant threat of going under due to cash flow issues, and the uncertainty of the coronavirus situation exacerbates that threat. While there are no simple solutions to this issue, the greater a business’s visibility over its financial data, the more warning it will have when something goes awry.

The right finance solutions offer real-time data and easy-to-use interfaces that are accessible from anywhere. They make it simple to review the company’s numbers and ensure that everything is on track at any moment. With a clear and up to date view of the company’s financials, business decision makers can also identify areas in need of streamlining or opportunities worth investing in.

Well kept books also come in to play when seeking external funding. Smart cloud-based finance systems generate detailed records without the need for human intervention – increasing the chance that investors will be convinced by the model and part with their cash. Some go even further and offer integrations that allow businesses to share their data directly with loan providers for an unprecedentedly fast approval process.

Avoid the hassle of old-fashioned expenses

When it comes to expenses, businesses must walk a fine line between allowing employees the freedom to make necessary purchases and maintaining control over all outgoings. Traditional analogue approaches either come down disproportionately in favour of the latter resulting in stifled growth, or result in lost cash for the business or the employee. Instead of opting for the old-fashioned receipt-based reimbursement technique, small businesses and start-ups would be better served trying a more helpful option.

Contemporary spend management enables financial gatekeepers to strike a better balance between freedom and restriction and saves employees from needing to pay out of pocket.

Preparing for an uncertain future

As this year has harshly reminded us, nobody knows what’s around the corner. For that reason, it’s important that small businesses and start-ups adopt a flexible approach to managing money that enables them to identify and address challenges quickly. The systems that the business chooses must be suitable in the immediate term, of course, but they should also consider the potential for the business to grow significantly.

Written by Carlo Gualandri, Founder and CEO at Soldo