In the second part of our series on scaling up your business, Anne Timpany, Director at On Tap Plumbers, explains why it’s important to get money management right.
People often ask me what the key to success is, and my answer is always to make sure you are on top of your accounts. If you want to grow your business, understanding how the money flows is crucial. The bigger the business is, the more complicated the money management gets.
One of the best pieces of advice my father ever gave me when we started On Tap Plumbers was: “It’s not about turnover, profit is the most important!” Knowing what the difference between turnover and profit is, and understanding the difference between gross and net profit, is essential. This experience and learning does not always come naturally to a plumber, but it makes a big difference to a business owner.
When we started trading in 2010, I stressed how important it was to my husband that we didn’t take the cheapest options when it came to accounts. As a business owner, you cannot do everything yourself, and the first element of your business you should consider handing over to the professionals is the accounts side. Over the last eight years, we have taken excellent advice and utilised a few tools to help manage the accounts for On Tap Plumbers.
Many small business owners try to cut costs by taking on the services of a cheap accountant or trying to do it all themselves, but this is a false economy. The best move we made was investing in the services of an exceptional accountancy firm. It has been instrumental in keeping the company on track and now also acts as a business advisor.
Keeping track of all the receipts and money you’ve spent takes up a lot of time. Consider taking on a bookkeeper, they aren’t expensive, can start at just £12 per hour, and can do a lot for your business. They will process your receipts, process invoices, deal with any queries, formulate and submit VAT, and work closely with your accountant to get everything ready come tax time. By paying a bookkeeper to do the jobs you don’t want to, you can focus on earning money.
Business accounting has developed with the help of technology and has made running your business a lot easier. By utilising a cloud-based system with mobile app, such as Xero or Quickbooks, on a relatively cheap monthly subscription, makes it easier to stay on top of the financial side of your business. Some of the handiest aspects of accounting these services deal with for small business owners include emailing invoices to customers, fast bank reconciliation, payroll, quoting, paying bills, claiming expenses, as well as the ability to view reports and get a financial snapshot of your business any time.
You have to invest in your business and your future. Keep a healthy cash flow, and also set aside money for ‘what ifs’. Grow during the good times, but be able to cope financially if anything happens to you or the marketplace.