For small businesses to survive and prosper in these challenging business conditions, they need to ensure that they have more than sufficient finance in place. Just as credit card companies are cutting consumers' credit limits and, in some circumstances terminating facilities, banks are likely to be reappraising the extent of overdraft and loan facilities made available to businesses.

Recent ICAEW surveys suggest that more than a quarter of businesses have difficulties in raising finance. For high growth businesses the figure rises nearer to 50%. There are a number of things you can do - one of which is to control expenses.

Firstly, set out in writing what is allowable in terms of guidelines for staff on expenditure for transport, entertaining clients and training courses. Secondly, make sure all expenditure is checked and authorised. Thirdly, keep separate budgets for travel, entertaining and hotels within the accounting system and regularly check the expenditure against budget figures.

Company credit cards can be used to aid control and accounting of staff expenses as the business receives a separate account for each cardholder but will have an overall credit limit. Firm guidelines on expenditure allowed on the card must be in place and the monthly statements vetted and approved.

Other tips include:

1. Make sure that all types and sources of finance have been fully considered because the right financing structure is vital. You must ensure that your company has the right mix of equity and debt finance. There is an array of potential financing options available, including equity finance; debt finance; bank overdrafts; leasing, hire purchase and contract hire as well as factoring and invoice discounting. Choosing the most appropriate can be time consuming, but having the right financing in place can be the difference between surviving and not. 
2. If there is a conflict between profitability and cashflow take the cashflow option.
3. Invest time talking to new sources of finance. You might need them if your current providers prove difficult.
4. If you have a term loan or overdraft be aware of any covenants and constantly monitor how close you are to breaching them.
5. Regularly update cashflow forecasts.
6. Put cashflow and financing on the agenda for every management meeting.
7. Prepare thoroughly if a review is coming up on any of your financing facilities.
8. If limits might be threatened "think the unthinkable" regarding the sale of assets.
9. Talk to financiers before you get into difficulties otherwise you devalue future forecasts.
10. If you are "cash rich" draw up a list of ways you could use surplus cash for the longer term benefit of the business.

It is vital that your financing arrangements are regularly reviewed. It is worthwhile periodically checking with existing and potential new finance providers to make sure not only that facilities are adequate but allow for future business developments.

For more information visit www.icaew.com

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