‘A business can be profitable, but if its not getting money in quickly enough, it can go bust’

For week three of the AIB Start-up Academy, the finalists received an introduction to finance and learned why managing finances and accounts are critical to running a business.

Gerry Delaney of Irish Times Training was the lecturer. He walked the start-ups through examples of how to prepare basic transactions, hitting on some key accounting fundamentals for running a business.

From there, the lecture transitioned to business planning. The group examined how to put together a set of financial projections for a business plan.

Delaney explained some key financial statements and how to use them to track and improve performance.

Delaney says the most important part of this is the projected cash flow forecast.

“A business can be profitable, but if its not getting money in quickly enough, it can go bust. There is a difference between profit and cash. Profit is sales figures, but you might not get paid for a couple of weeks or months. Managing cash is an important thing for start-ups. They’re often short of cash,” he said.

The lecture included a discussion of various sources of funding, from family and friends at first to private investors, Government supports and venture capital.

“When you get investment, (the investor) effectively signs up to the business plan, and they’ll track whether it’s performing. Have you achieved what you said you would? If you do, people are more willing to put more money in.”

He says having a plan means a business has targets and milestones and can monitor its performance against the plan.

“You can see if you achieved your sales target. If you didn’t, it helps you to plan going forward…It feeds back into what’s called budgetary control, which is tracking your performance against your budget.”

Delaney is a chartered accountant who trained in Ernst and Young and worked as a finance director with the Jefferson Smurfit Group for 15 years. He has experience funding and working with various early-stage companies.

The week's mentor was Padraig Masterson, a relationship manager for SMEs at AIB.