Effective financial management is essential for running a successful brand. As a brand owner, it is crucial to have a clear understanding of your finances, manage your cash flow, and make informed financial decisions. In this post, we will provide tips for financial management that can help you improve your financial skills and achieve your brand goals.
1. Create a Budget Creating a budget is the first step towards effective financial management. This includes identifying your sources of income, setting financial goals, tracking your expenses, managing expenses, and prioritising your investments on high-value activities such as service, branding, marketing, and sales. When you have a clear budget, you can make informed financial decisions that align with your goals.
40% of small businesses fail because of poor financial management. (Source: The Telegraph)
Identify your sources of income
Set financial goals that stretch you to push for growth
Track your expenses
Manage your expenses
Prioritise your investments on high-value activities such as service, branding, marketing, and sales
2. Establish Financial Controls Establishing financial controls is crucial for effective financial management. This includes creating financial policies and procedures, implementing internal controls, and regularly monitoring your financial performance. When you have effective financial controls, you can prevent fraud, errors, and other financial issues.
In 2020, fraud losses in the UK financial sector amounted to £784 million. (Source: UK Finance)
Create financial policies and procedures
Implement internal controls
Regularly monitor your financial performance
3. Manage Cash Flow Managing cash flow is a key aspect of financial management. This includes managing accounts payable and receivable, forecasting cash flow, and maintaining adequate cash reserves. When you have effective cash flow management, you can avoid financial crises and make informed financial decisions.
Late payments are a major problem for UK small businesses, with over 25% of invoices paid late. (Source: Small Business Commissioner)
Manage accounts payable and receivable
Forecast cash flow
Maintain adequate cash reserves
4. Invest Wisely Investing wisely is an important part of financial management. This includes understanding investment options, diversifying your investments, regularly monitoring your investment portfolio, and prioritizing your investments on high-value activities such as service, branding, marketing, and sales. When you invest wisely, you can grow your wealth and achieve your financial goals.
In the UK, the average return on investment for small businesses is 22%. (Source: UK Business Angels Association)
Understand investment options
Diversify your investments
Regularly monitor your investment portfolio
Prioritize your investments on high-value activities such as service, branding, marketing, and sales
5. Minimize Debt Minimizing debt is crucial for effective financial management. This includes paying off high-interest debt, using credit responsibly, and avoiding unnecessary debt. When you minimize debt, you can improve your financial health and achieve your financial goals.
In the UK, the average business debt per company is £40,000. (Source: The Guardian)
Pay off high-interest debt
Use credit responsibly
Avoid unnecessary debt
6. Seek Professional Advice Finally, seeking professional advice is an important part of effective financial management. This includes consulting with a financial advisor, accountant, or other financial professional to get expert guidance on your financial decisions. It's worth the investment if you find a good accountant or advisor they will most likely help save you more than they cost. That's their job. Side note: Most accountants are focused on saving money, and recording your transactions, which is great. As a brand leader, it's your job to create income for the company to grow, so keep this in mind if your advisor tries to cut "value adding" costs.
In the UK, over 60% of small businesses do not have an accountant. (Source: FreeAgent)
Consult with a financial advisor, accountant, or other financial professional
Get expert guidance on your financial decisions
Stay informed about financial best practices
By following these financial management tips, brand owners in the UK can make informed decisions which will help them grow and continue to support their brand growth prudently.