Taking the ‘F word’ out of Finance

Female founders tell us their business finances are a big challenge area. Finance can feel more complicated than it needed to be, and it can diminish your confidence during investor conversations.

Why is it that female founders struggle with finance?

Culturally, we treat women differently financially from men. There are three key factors:

1. Conditioning: we treat boys and girls differently from an early age – from pocket money to talking about money, men were historically in charge of the finances. It is a deep cultural belief that finances are more a men’s domain.
2. We don’t speak to girls and women as much about finances. Many women have drilled into themselves that they’re ‘not good with numbers’, which can be a self-perpetuating myth.
3. We assume men have competence in funding and that women don’t.

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None of this cultural conditioning is fair, right or easy to deal with. In fact, research shows that female led businesses are often more profitable than those run by men. But rather than getting stuck in the injustice of this, we’re here to help female founders to turn this around.?

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Financial forecasts - your business plan told in numbers.

Financial forecasts are so important for high growth founders as “cash is queen”. What we have in the bank may not be enough when we project forward to the lumps in our cash flow: VAT returns, corporation tax, PAYE, outstanding customer payments. You need at least a three-month projection of your finances to give an unobstructed view.?

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For a high growth potential business, use your forecast to determine whether you have the means to generate the revenue over time to meet your goals. Consider what new products, services or projects you require to meet your longer term financial targets.

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You are your biggest investor. Your own time, sweat, tears, and money are going into your business. If you’re doing this blind - without a financial plan - you’re doing yourself a disservice as the prime investor.

Where to start

You’ll get a clearer view of the future by getting numbers down on paper, even if that’s just in a word document. This gives you a quick sign of patterns to help drive your decision making.

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It’s worthwhile having a robust spreadsheet that shows your assets and debts, profit & loss along with a cash flow forecast to see how much money you have. This should have your historic data and your forecast. This becomes a daily dashboard that can help drive your decision making and prioritise your tasks. You can build one yourself at a basic level, or better still, engage an accountant to help you put together a format that will work for your specific business.

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A good finance specialist will ask the right questions and help you stress test your assumptions to ensure your predictions are robust.?

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Three financial reports you must have and understand?

It’s so important that founders know their finance. Investors are entrusting you with their money, so you’ll need to have a handle on the finances to ease their peace of mind.?

Before speaking with investors, ensure you have and are deeply familiar with the following three reports. You can expect to be questioned on these and each report provides a unique microscope on your finances.

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1. Profit & Loss
2. Cash Flow
3. Balance Sheet?

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Some tips on what you should look for from professional financial support

Many founders have a handle on their finances and easily manage these in the early stages. Be aware of your limits as finance can get technical and it’s important to recognise the point at which you need to engage a professional to help.

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When you’re selecting your financial expert, consider:

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• Do they communicate in language that you understand??It’s important that an accountant speaks in your language and works with you to increase your financial knowledge.

• Are they trying to help you understand your figures and build your ability to communicate these??Don’t accept a ‘leave it with us’ approach.

• Does your accountant ask challenging questions??These will help you improve the financial position of your business and add value that you hadn’t considered.

• Do they understand high growth business??Your average tax accountant rarely addresses the financial requirements to scale for growth. You should look for a commercial, forward-thinking financial director who will help you try to solve the problems that haven’t yet happened.

Know your numbers

Knowing your numbers is a critical element to successfully raising investment, and it’s important that as a founder you feel empowered to discuss your finances with potential backers. This is a key step in our?Fundraising Academy programme?for female founders. Get in touch and talk to us today about getting your finances in order.

?This article was originally published at https://www.enterthearena.co.uk/taking-the-f-word-out-of-finance