Finance

Getting the Books in Order

CRAIG MOORE writes about the oft-neglected system of book-keeping and how an organized practice of book-keeping can help a business get its much required investments and financers.

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Irrespective of the success of your business, there comes a time when acquiring additional finance is key to reaching the next stage of growth. Business owners can now access finance through traditional channels such as banks, or through newer channels of alternative finance such as peer-to-peer lending and crowd funding.

Irrespective of the selected route, what remains constant is the critical need to maintain a solid record of business accounts. It’s a simple requirement requested by finance institutions of every kind, but often remarkably overlooked by many entrepreneurs and business owners.

Book-keeping is often perceived as a lower priority, unnecessary or sometimes just a total inconvenience. Unfortunately, this is a short-sighted attitude and ultimately detrimental to the future growth of the business. Even if, as a business owner, your skill set does not lie in good management of financial records, it’s important to find a resource who can deliver this elemental faculty.

The benefits of book-keeping are considerable. Not least because it instills rigor into the day-to-day operations of the business, enabling leaders to track transactions, manage budgets and provide the ability to set goals and outline plans.

Good record management provides essential insights into the overall growth and profitability that are crucial to the ongoing development of the business. It exposes what’s working and what isn’t, meaning that timely and informed decisions can be made regarding the necessary adjustments to business strategy. It also allows the business to forecast more accurately and ensures it is well-placed to respond quickly to internal and external influences, such as market trends and opportunities, as they arise.

Efficient book-keeping can serve as a warning system by highlighting important factors such as an increasing cost base or anomalous transactions.

Efficient book-keeping can serve as a warning system by highlighting important factors such as an increasing cost base or anomalous transactions. It also reminds us of important payment deadlines that are not to be missed and can help identify any customers who aren’t paying on time. Evidently, this allows management to manage cash flow in a much more effective manner, which is fundamental to the survival of any business. Moreover, it can provide a protective measure against dishonest internal practices, such as theft or fraud.

A commitment to keeping a robust, accurate and accessible set of accounts proves fundamental when the time comes to seek additional funding for working capital or expansion. Evidencing this basic skill enables a Small or Medium-sized Enterprise (SME) to exploit finance opportunities more easily than other SMEs that have poorly managed books. A business that can offer audited financial statements which can be easily comprehended and analyzed by management, banks and potential creditors will make a far more compelling case for any loan application and favorable credit terms.

Any financial institution receiving an application for finance from an SME will immediately wish to review the business’ financial records in order to determine the credit risk. Businesses that have adopted a hap-hazard approach to maintaining their financial records do not inspire confidence in their managerial abilities and are unlikely to be progressed, however exciting or lucrative their business plans may be.

When it comes to securing finance, a good set of accounts is clear evidence that the business leader has a solid understanding of the operations and is committed to running an efficient and organized business. Good book-keeping is not a ‘nice to have’, it’s a mandatory skill required to successfully manage and grow the business. Neglecting it will certainly impact the ability to find finance or more seriously, risk the future success of the business entirely.

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About the author

SPI Group

SPI Group is a well known publishing house in the Middle Eastern region. The group possesses three premium publications: Intelligent SME, Robust RAK and Apps Middle East. The group also conducts the Emirates NBD Global Business Series, The SME World Summit and The Global App Summit.

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