Building a successful startup business is hard work. Having the original business idea can be the easy part; setting up and running a company to sell this idea is where things get more difficult. And finance can be one of the big stumbling blocks for fledgling small businesses.
A lot of young entrepreneurs are extremely passionate about their new venture – but they’re not experts in finance, bookkeeping and accounting. And being on top of your finances can really make or break a business in those first few years. Getting the right advice and choosing the right finance package is vital.
We spoke to Esther Thompson, founder of TeaHuggers, to find out what it’s really like single-handedly running your own business. And we asked her how moving to cloud accounting has helped to really get a handle on her sales, invoicing and bookkeeping.
Getting on top of your finances
Starting a small business is incredibly difficult. It takes an enormous amount of effort and motivation to get it going and to keep it going – it’s a tough learning curve when you’re running your first business venture. Picking the right strategy is important, as Esther explains:
“That’s the challenge of running your own business: if you’re part of a corporate machine then you’ve got a whole team of people to bounce ideas off and quite set ways of doing things – and that can work in some circumstances. But if you’re running your own business, you can rip up the rule book and do what you like. Sometimes that can be quite daunting, especially when the industry is changing so quickly with new digital opportunities.
So it’s good to talk to people who are more experienced, whether that’s mentors or people in the industry, who can tell you what has worked well and the reasons why. That gives you the opportunity and the momentum to try out low-cost activities to get some momentum behind the business.”
Becoming an expert in your finances
When you’re employed by someone else you’ll have one particular role, based on your own particular skills and experience. But when you’re a sole trader running a startup, you have to be across or doing all the different elements of the business. You have to become an expert in accountancy, marketing and sales – in fact, all of the day-to-day elements of the company. If, like Esther, you’re not a finance expert this can be a challenging part of running the business.
“It can be daunting doing your own finances and making sure that you’re doing all your projections properly and, ultimately, making sure that the business is growing and is going to be viable. So any help with things like Xero TV’s online videos and eLearning like Xero U is enormously helpful and provides a bit of hand-holding when business owners are trying to look after every element of the business. If you can make accounting as simple and easy as possible then people are going to go for it.”
The benefits of moving to cloud-based accounting
So, has choosing a cloud-based package for her accounting had an impact on how Esther runs her business? She’s clear that moving to cloud accounting has made a big difference.
“I don’t come from a financial background, so I found the idea of bookkeeping quite daunting. But cloud accounting has just taken a lot of the pain out of the business and given me a lot of analysis of the numbers that I just wouldn’t have had previously. I can check my sales reports on a daily basis and see how my month-end is going. I did a big tradeshow at the weekend with some large retailers and they were asking for sales figures for each flavour of tea and I can just go into Xero and pull out that data literally within three minutes. It’s quick and painless to do.
I’m running the business by myself and doing every element of it, so I can input the information into the invoices and then automatically send my invoices as soon as I’ve raised them. And they look really professional: like something that a bigger, well-organised finance team would send out. The way it’s organised is very simple and easy to do.
The cloud also eradicates any problems with saving data or losing data if anything happens to your computer. When I was originally using an Excel spreadsheet for my finances, a couple of times I accidentally saved over my invoices. Those errors just can’t be made in Xero.”
Getting more from your data and reporting
Cloud accounting gives you unparalleled access to your data alongside reporting functions that give you a clear view of your numbers. So instead of waiting for your accountant to tell you what’s going on with your business it gives you a really raw impression of what’s happening in the business right at that moment. For Esther, this is an incredible benefit when you’re trying to make sure your cashflow is fit and healthy.
She says: “I can look at my reports and say ‘Actually, unless I make X amount of sales next month, I won’t spend the £400 I had planned to spend on marketing.’ It’s real-time financial data which is just brilliant for being able to manage your cashflow and your overall business.
It’s so important to have this kind of control over your finances. At the end of the day, that’s the critical side of business: if you’re not making money then the company’s not going to be viable. Having that knowledge of the numbers day-by-day is brilliant. You’re not under any illusion of your business growing at a faster rate than it actually is. You can see every day what sales are coming in. It’s just a really good management tool.”
You can get more information on the benefits of cloud accounting with our Xero Small Business Guides.
Content on this page is paid for and provided by Xero, sponsor of the business essentials hub.
