HSBC Bermuda and the Bermuda Economic Development Corporation [BEDC] hosted the second in their joint series of business seminars aimed at small businesses on the island.
Entitled “Knowing your Numbers”, the two hour seminar held at HSBC Bermuda’s Harbourview Centre focused on getting to grips with business financials. Guest Speakers from financial services firms reminded business owners of the importance of keeping sound financial records in order to track and monitor business performance.
In countries that have income tax regimes, all registered businesses are required to produce audited financials to validate their income tax returns. This is obviously different in Bermuda where there is no income tax.
A spokesperson said,”A 2011 survey by BEDC revealed that only about 30% of small businesses in the areas surveyed currently compile regular financial statements. When market demand was high on the Island, successful businesses had a positive cash flow and therefore had less concern about long term financial sustainability.
“The new reality requires that all businesses take a careful look at how they generate and spend income and how efficient their financial management practices are.”
Anton Schmitz CA, a Manager with the Private Company Services group at PwC explained the importance of keeping balance sheets, income and cash flow statements in order to know what’s really happening in your business. “In this economic climate”, Schmitz noted, “businesses are having difficulty balancing their revenues and expenses.
“It’s essential to do regular budget and cash flow forecasts so that you understand the needs of your business and what drives its success or failure. This will enable you to better manage your cash flow all year round.”
Businesses that perform financial forecasts and plan ahead will be much better off in the longer-term as they can anticipate challenges and react to them – potentially avoiding financial difficulty.
“Making regular sales doesn’t automatically mean you’re profitable”, pointed out Trina Roberts, Head of Business Banking of HSBC Bank Bermuda. “Your financial statements will tell you if your business really is running at a profit or not”. Roberts encouraged business owners to love their numbers as much as they have a passion for their businesses.
Ray Jones of Faro Management Solutions took participants through each line item of the balance sheet, the “snapshot” of their business, and the income statement which shows whether or not a business is profitable over a period of time. “The primary users of these statements should be you, the business owner”, he pointed out.
“Not HSBC Bermuda or BEDC. The time is over when you can go into a meeting with a bank and have your accountant speak for you. You need to know your numbers and make sure they are balancing”. Jones revealed the traps into which many small businesses fall. One of these is not depositing cash earned straight into the bank. “How much gets spent on personal uses instead of going straight into your business deposit account?” he asked.
Another common trap is having a huge amount of accounts receivable. “Small businesses need to avoid being paid on credit”, Jones said. “Unless you have very large, influential clients, try to get paid cash on delivery”. The presentations elicited a lively discussion with participants, who were eager to get advice on a number of financial terms and challenges.
The seminar ended with small round-table discussions during which business owners were able to interact with Relationship Managers from HSBC Bermuda. Businesses at the seminar indicated that the session was extremely informative and that they wished even more time was available to delve into the topic.
Michelle Khaldun, Executive Director of BEDC, wrapped up the seminar by inviting business owners to implement what they had just learned. “Every business owner needs to make sure they get the help necessary to be able to get their numbers in order.
“Do you have the right software programs to record your sales and expenses? Do you have an accountant who you can call on to help you? This may seem like an extra expense, but the truth is, if you want to be in business you need to know your numbers.” Khaldun also invited business owners to call on the Bermuda Economic Development Corporation for any support they need in this regard.
The HSBC-BEDC business seminars are designed to enhance the competitiveness of small businesses on the Island. Forthcoming seminars will be held on the subject of “Managing Business Risk” and “Successful Retail Management”.
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