If you are a business owner you will no doubt already be quite familiar with the ins and out of basic finance. However, if you are looking to expand your business in 2018, you may be thinking of the implications of expansion, not just from a commercial or marketing perspective but from a financial point of view as well. Indeed, it would be accurate to say that finance is the main focal point of any business or organisation and without proper finance, a business will fail.
Finance involves all the things that make up the lifeblood of any organisation. From the beginning, it is finance which makes any business viable. Without cash flow for example, it will be impossible to pay your suppliers or wages to employees. In fact, it wouldn’t be an exaggeration to say that cashflow is imperative to the success of any business and healthy cash flow is derived from having good, solid finance in place.
Applying for Finance
Any entrepreneur will need to secure finance by working with finance companies to grow their business.
For most businesses, the first port of call would be to the commercial banks or applying for finance online. Most of these banks have dedicated sections which have provisions specifically for the business owner often with preferential rates for business loans and overdrafts.
However, these traditional methods of applying for finance have diminished quite significantly over the years. Coupled with the fact that consumer confidence in the banks deteriorated because of the banking crash as well as disillusionment with the banks overall. Nowadays you will be spoilt by the plethora of options and choices in the finance area whereby specialist finance companies compete fiercely with products on offer from the main commercial banks.
All these finance companies will provide different services, like asset finance loans or even commercial vehicle insurance, much like the banks at various competitive rates. Most are reputable and are covered by the Financial Markets Authority (FMA). Of course, it’s important to do proper research as to the best options available for your specific business.
As a responsible user of loans, the decision to lend will be based on not only a credit score but also the affordability of any prospective loan. You may feel your business is thriving but if you are late paying your vendors and have had difficulty keeping to deadlines on previous loan repayments then it is unlikely that you will secure the best rates from these lenders.
You will also need to ensure that the company and its operations can support the repayments which could be a lot higher than what was previously being paid. This is closely related to your business’s financial gearing ratio (amount of debt to owner’s equity). If this is too high as a result of your new financing, then there will be a significant increase in financial risk as a result of any economic downturn. It is essential therefore that you are confident in your enterprise and have an excellent business plan in place. This business plan will be imperative for not only securing finance from the institution but also to keep your business true to your initial objectives.
Now with your new finance in place, you will need to ensure that all your tax affairs are up to date and complete. There are many facilities to hand which involve instruments to take advantage of various forms of tax planning to allow for the best cost savings. If, for example, your business has suffered any losses in the previous or current financial period, you may be able to offset these losses against profits. You will also be able to utilise capital allowances particularly if you have a lot of equipment utilised in the business which a can be used to reduce taxation.
With this mind, one worthwhile investment will be that of a good tax planning service. So many companies fall foul as a result of not seeking professional advice when it comes to their finances. Maintaining accurate financial records is a basic requirement and a legal requirement if your business happens to be limited. A failure to keep good records will lead not only to complete disarray but could also land you with a criminal record.
This brings us to tax returns and the requirement to submit them to the tax office.
Tax returns whether in Auckland, or anywhere in NZ, can strike the fear of God into most people, but it really doesn’t have to be that way. Sure, they can be time consuming and there is a requirement to account for all manner of business expenses and filing corresponding receipts. However, with forward thinking, your tax planning can make the process somewhat pain free. In fact, these days it has become remarkably simple even for larger entities to deal with their tax affairs. It’s always a good idea to keep ahead and up to speed with new financial legislation and decisions in the budget from year to year as the decisions made in parliament can and do affect the mid and long terms financial prospects of most businesses.
These days this is even more relevant, especially with the result of the recent European Referendum in 2016. Consequently, there persists an air of uncertainty and the banks and finance companies will potentially create more vigorous stipulations with finance possibly getting harder to access until the business community can feel some confidence in the financial health of the country, this is always worth considering when dealing with countries such as the United Kingdom.
That aside, any business owner should continue to be focused on their company and/or organisation and seek to keep their affairs in order with proper financial controls and finance given pride of place ahead of anything else. The adage of ‘looking after the pennies and the dollars look after themselves’ is truer words never been spoken. It doesn’t matter how many dollars and pennies are going through your profit and loss, the principle is the same. Keep this in mind and your business will thrive!