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Keeping yourself and your business healthy

Published on 20th December 2018 - Last update on 19th November 2019

Managing your finances is essential for success - but for many small business owners, it means worry. In fact, it is not uncommon for sole traders and other small business owners to report that managing money, chasing payments and monitoring cash flow has become so stressful that it is making them ill.

Research from business innovation charity Nesta suggests that as many as 40% of small business owners have found that managing their finances has become the most stressful part of being in business.

Many small business owners actually started their own business to reduce the stress of working to the deadlines and demands of an unreasonable employer. Ironically, they then find they have taken on sole responsibility for managing their finances, creating an entirely new level of worry.

Do you suffer from business money management stress? At Rangewell, we can help - by ensuring you can find the funding you need

It is not their core activities that cause the anxiety. Most people go into business to provide products they know and love or services that are second nature to them. Very few (apart from professional accountants) go into business to deal with the minutia of managing money. Perhaps with less than happy memories of maths lessons in mind, they find the task difficult to deal with.

Dealing with VAT and tax returns is frightening enough, especially when the papers are full of stories of a vengeful taxman punishing those who make mistakes. Keeping in control of invoicing, profit and loss and credit control can be worse, and financial forecasting can be a nightmare.

The time taken on simply balancing the books can now be a serious drain on many small businesses. Many business owners give up their evenings and weekends. One in five finds him- or her- self spending more than eight hours a week on the task of keeping track of the cash.

What can a small business do?

Fortunately, there are ways to ease the burden of money management before it causes burnout. Simply outsourcing the book-keeping to a professional might work for some businesses but for others, the solution might simply be to take advantage of the many software packages that are available.

Depending on the size and nature of your business, it should be possible to automate everyday management. Instead of old-style manual entry accounts, you can find software packages which will simply let you note bills sent and invoices paid, and compile accounts for you. Some are now able to scan paper documents and read electronic data, avoiding any worries about missing a key figure.

Replacing all the paperwork and stress with a worry-free app on your smartphone could be an important step in eliminating the dangerous workplace stress. It will probably become essential when the Government’s ‘Making Tax Digital’ initiative comes in to place next year.

This will mean that most small businesses will be obliged to submit their tax returns online, so it makes sense to get used to the software that will automate the task now.

But worries about keeping track of money may be only part of the problem. A much more serious problem for many businesses is getting the money in from clients which are slow to pay.

The problem of slow paying clients

The problem of late payment is a common headache for many businesses.

Those that supply other businesses - rather than deal directly with the public - are at the greatest risk. Many businesses have a deliberate policy of paying suppliers late. By delaying, they improve their own liquidity and cash flow with what is, in effect, an interest-free loan.

It means continual worry for the suppliers who are owed money, and a need to chase for payment which can be stressful enough in itself.

Fortunately, businesses which work to supply other businesses and send invoices for their work can use those invoices to provide a source of immediate payment - which can avoid the stress of cash flow worries, and even eliminate the need to chase for payments altogether.   

Invoice Finance can provide a financial lifeline

With Invoice Finance, a funding provider will use your invoices as the security for cash advances. Instead of waiting for 30, 60 or even 120 days to get the money your business is owed, you could receive up to 80% of the value of every invoice you issue as soon as you issue it.

You will receive a second instalment once your customer pays on their usual terms. This will be less the invoice provider’s fees, which will be around 1.5% to 3% per 30 days. The actual charges involved will be based on factors such as your company’s risk profile and the sector you work in.

There are many types of Invoice Finance, but Invoice Factoring can provide a simple answer for small businesses facing late payment problems. The invoice financier will take over your entire sales ledger and take care of debt collection from all of your customers.

You will have the advantage of highly professional credit management, with collection and credit checking at no extra cost to your business. It means outsourcing all the tasks and headaches of everyday business money management, freeing up your time for your core business.

Invoice Factoring is not the only type of Invoice Finance to consider. Invoice Discounting can provide a confidential service for larger businesses and can be ideal if you have an annual turnover above £500,000 with an established credit control system in place.

Selective Invoice Finance can offer a more flexible solution. It lets you use only the invoices you wish to select for funding - so that large invoices for a large and lucrative customer who pays late can go from being a serious liability to a valuable asset. There are even International Invoice Finance arrangements, which can take the worry out of doing business overseas.

At Rangewell, we work closely with our clients to understand their needs before we recommend a particular type of finance. If you are thinking about an Invoice Finance solution, it makes sense to discuss your needs with our experts, especially as our service - and their expertise - is absolutely free.

How else can you avoid money management stress?

Invoice Finance is not the only way to deal with the stress of managing money.

If you do find you need additional support, one way of doing so is by applying for Working Capital Finance, which could provide access to business finance solutions such as Merchant Cash Advance, Invoice Finance, Overdraft Replacement and Asset Refinance.

At Rangewell, we’re an Access to Finance specialist working with over 350 lenders to offer you a comprehensive overview of more than 23,000 business finance products. Our services are free for business owners and their advisors and we’ll also guide you through the application process. So if managing money is causing your business stress, the healthy answer may be simply to call us at Rangewell.

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