Scaling up: a guide to managing finances for growing companies

Your company is no longer a start-up venture. It’s generating sales, profits are being made – or forecast – and you’ve expanded your team and office to accommodate that growth.

This likely puts your business in scale-up territory. These are defined as enterprises which have over 10 employees and then grow staff or sales by above 20% a year over three years.

Statistics highlight the impact made by scale-up businesses. They are highly productive, averaging £235,000 turnover per employee, according to a report last year from the ScaleUp Institute. They are also twice as likely as their peers to be trading internationally and to have innovated in the past three years, the report found.

You know that your business is going from strength to strength, but this phase of business growth presents whole new challenges too.

Making the leap

Among the challenges scaling-up creates are the need to recruit a bigger team (including in management positions), maintain company culture at scale, and implement the right processes.

One of the biggest challenges is to manage a company’s finances as it shifts up to the next stage of growth. This might involve investing in new facilities and equipment, or sales and marketing. Or perhaps launching new products or services, possibly targeting new markets in the UK or overseas. And its growth ambitions might involve acquisitions or a merger with another business.

This all requires cash. The ScaleUp Institute’s survey showed that 4 in 10 scale-ups don’t consider they have the right amount of finance in place to fulfil their ambitions. Funding options to consider include:

Business angels: as well as money, they can provide expertise and contacts. Visit the UK Business Angels Association website to learn more.

Bank finance: traditionally a company’s first point of call. Options such as loans or asset finance may suit business owners who don’t want to reduce their stake in the business by bringing in external investors.

Private equity: this is medium to long-term finance, provided in return for an equity stake and a clear plan for delivering a return. Like with business angels, there is potential to benefit from the expertise of the investor. See this guide to private equity to find out more.

Alternative funding: this can be a faster way to raise funding but does require you to put a lot of work into promotion before you begin funding and if you don't hit your target you might not get any funding. Sources include crowdfunding sites such as Seedrs and Crowdcube, or peer-to-peer lending sites such as Funding Circle. The Alternative Business Funding website is aimed at simplifying SME owners’ search for appropriate finance.

Grants and regional funding: your business objectives must suit the regions growth and employment demand before being successful. See the ScaleUp Institute, the British Business Bank and Business Growth Fund websites for more information.


Tips for managing your finances

Once adequate funding is in place, managing finances for growth becomes more important than ever. Consider these tips:

Update your business plan to detail future financial needs – this is particularly important if funds have been raised from new investors who impose targets and a timeline for exiting their investment.

Beware of the risks of overtrading and the pressures this puts on working capital.

Prepare for an increase in reporting and compliance requirements, particularly if expanding into new territories overseas.

Consider a multi-currency current account, such as Fair Everywhere. These enable businesses to manage all their day-to-day business banking and international money transfers in one place.

Invest in a system to monitor the day-to-day progress of the business, rather than reviewing historical information. Smith & Williamson, a professional services firm, says this might include tracking:

  • Details of daily or weekly sales or billings
  • Bank balances
  • Amounts owed to and by the business
  • Short-term forecasts showing likely receipts and payments over the next week or month, as well as the resulting bank balance

Seek independent advice. Nimisha Brahmbhatt, an independent management consultant, suggests if companies currently use an accountant for their finances or compliance, they should go a step further, and seek their advice on the business’s ambitions and how to achieve them. Nimisha also recommends:

Keep an eagle eye on the future of the business. Look at sales projections and verify them with your team.

Reduce spend on unnecessary subscriptions, tech and tools that you just don’t use, so that you can realise those funds to invest in the tech that will actually scale.

Leverage resources that your business banking gives you in order to manage and track your finances better. Lots of banks today provide apps and support to help you achieve your visions.


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