Managing your finance-some advice...

Deborah Short and Richard Jones from Pilot Fish offer advice on financial management for small and medium sized enterprises.


Let us share with you a conversation we had with…lets  call him Paul recently. He is the Managing Director of a social enterprise.


Me:    Hi Paul, how is business going?


P:         Great things are on the up.


Me:    Good to hear what were your sales last month?


P:         Um, don't know exact number yet as Sheila is off but I had a  few good orders.


Me:    Have you managed to maintain margin?


P:         Oh yes, but we only really know at year end when we count stock.


Me:    So no cash worries at the moment?


P:         No none, we have plenty of cash in the bank.


Me:    Great. What is your balance?


P:         Uh. Don't know. I need to ask Sheila.


Me:    Did you sort that overdraft out, isn't it due to expire soon?


P:         Don't worry, I will get to it.


It turns out sales were 30% below budget, margin had dropped 2% and there was a creditor and VAT payment coming up that would require the overdraft to be used. Things weren't quite as Paul had thought and in fact his business was on a path to failure. Without proper management information a business is running blind and will, unless just lucky, run into problems.


Paul is not alone. Many businesses, not just social enterprises, face similar issues to Paul. 
It is usually because the managers are busy running the business that they are passionate about and are focused on delivering the social value.  Also, many don't have the skills and
knowledge to understand what financial management systems they should have in


Financial information is essential for running a business effectively.  A budget should be prepared against which you can measure your actual results.  It will help you check whether you are on track and gives you the opportunity to make changes if you are going off track.  A profit and loss account will show whether the business is making a profit, what margin is being achieved and the monthly costs of running the business.  A cashflow will show the timing of receipts and payments and identify any funding requirements, for example an overdraft or loan facility. 


 So ask yourself, do you:


 1.         Track sales weekly against targets?


2.         Understand your margin?


3.         Know what the monthly costs are of running the business?


4.         Have a cash flow forecast?


5.         Have plenty of cash or borrowing head room to see you through?



If you answered no to any of these questions, you will want to look again at your management information.


Good management information is provided as regularly as necessary and is timely, relevant, insightful and informative.


If you need help with your management information, your Accountant can probably assist you.  Dependent on your relationship and the amount of help you need, they may
be happy to discuss with you what information is most relevant and how to pull
it together at no charge.  Pilot Fish Partnership offers a free Financial Healthcheck to help an organisation identify areas within its finances that need addressing. 


You may decide it is worth training your bookkeeper up, or employing someone with the knowledge and skills to be able to provide you with the relevant information or find a Board member with expertise you need.  Alternatively, outsourcing is an option, either to your Accountant or another provider. 


There are organisations that provide support and expertise to the social enterprise sector free of charge or via grants and funding.  Inspire 2 Enterprise provides a free-to-access Information and Advice Service by telephone, email and online via webcam technology (see page 9 for more details).


Pilot Fish Partnership provides financial advice on a flexible basis.  For further information
contact Vick Neeve on 01778 382730 or visit