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Are you friends with finance? Why finance and numbers are a social entrepreneur’s best friend

Undoubtedly, getting to grips with finance can be one of the biggest challenges when starting a business.

For many social entrepreneurs we support, revenue streams and cashflow projections can sound like a foreign language when all they have is the beginnings of an idea. However, understanding the benefits of making friends with finance and managing cash flow is crucial to succeed in business.

Sheila Fazal, an experienced Chartered Accountant and founder of Social Enterprise Accountancy Services Scotland CIC, told us:

Social entrepreneurs have certain statutory responsibilities to maintain accounting records and prepare accounts. They must also prepare financial projections for funders as they set up and grow their businesses.

Having enough cash in the bank can be the difference between survival and failure, so understanding how to manage their cash flow is key to success.

When starting a business, you may not necessarily appreciate that cash flow planning and management are more than just tasks for securing funding.

Cash flow management is the process of analysing, monitoring, and optimising the inflow and outflow of money from your business. Tracking this allows you to forecast the cash your business needs to operate month by month, ensure your business has enough of a buffer (reserves) to meet unforeseen circumstances and enable you to plan for growth.

Having a confident grasp of your numbers is also essential when you are trying to secure funding or applying for a loan. Funders and lenders must be satisfied that you understand your numbers, forecasts and assumptions.

For example, a social entrepreneur applying for one of our Build It awards must submit cash flow projections as part of their application. Often, a weak or poorly completed cash flow will result in an unsuccessful application, even if other areas of the application are strong.

Our Relationship Manager, Jacky Tjivikua said:

An applicant’s cash flow allows us to assess whether the social enterprise has healthy and realistic growth. It gives us a snapshot of the business model, how it generates income, uses it, and whether it’s consistently making enough money to cover operational costs, including seasonal fluctuations.

We look at cash-generating activities. We want to see that these cover the enterprise’s current and future business operational costs and deliver on its social aims without heavily relying on grant funding. We also look at the assumptions behind the figures. When applicants can demonstrate a gradual progression from being grant-supported to becoming self-reliant through their core services, it gives funders confidence that the social enterprise will continue to have a sustainable social impact.

The good news is that while the world of finance may sound daunting, it doesn’t have to be, and we can help you.

Our upcoming Just Enterprise Making Friends with Finance Day on 22nd February in Glasgow will help you unpack it and assist you with the practical steps to make friends with finance.

Over the course of two sessions – a cashflow workshop in the morning and a practical accounting records tutorial in the afternoon – our Business Advisor Brian McMillan and Chartered Accountant Sheila Fazal will help you to:

• Appreciate the benefit of cash flow planning as a management tool. It is more than just a task to complete for a funding application!
• Increase your confidence in all the financial aspects of running your social enterprise.
• Understand the different types of financial information, how they interact, and the benefits they can provide you and your business.
• Gain a greater understanding of how to pull together your financial projections, what they tell you about your business, and what accounting records you need to maintain and retain.

You will learn in an informal and supportive environment, where you, your fellow delegates, and the trainers can share experiences and gain practical hints and tips to help avoid common pitfalls. And what’s even better, the sesssions are free to attend!

Whether your New Year resolution is to improve your finance skills, nail the prep for your year-end accounts or secure funding or investment, these sessions will set you up for success.

Places are limited, so don’t delay! Book your place by registering on the Just Enterprise website or follow the links below.

Making Friends with Finance: Cash Flow Management

Making Friends with Finance: Understanding and Maintaining Accounting Records