Takaful

As a business owner, you're always making plans for your future. You're planning ahead on a daily, weekly and monthly basis, looking ahead to anticipate challenges and opportunities. Whether your business is in its early days or it's become established in its market, you'll always be thinking about tomorrow and what comes after.

A vital part of that planning is around finance - how you're going to pay for the people, the stock and the infrastructure you need not just to keep going, but also to grow the business. You want to avoid running out of working capital - cash - because that's the lifeblood of commerce. It's cashflow that makes or breaks a business.

For many, finance planning isn't the most exciting part of running your own business. But it is perhaps the most important task, and certainly one of the most rewarding when you get it right. Investing time in finance planning can literally pay dividends in the form of better cashflow and improved profits.

If you're undertaking any major new project in your business, such as launching a new product range or expanding your geographical market, you expect to put together a business plan. This covers all aspects of the project, including the financial element - this is your finance plan.

Here are our suggested steps for putting together that business finance plan.

Step 1 Know what you need and why

Most planning starts with having the end in mind. You have a vision for where you are going - such as opening branches in new locations, increasing turnover by a specific amount or becoming a recognised brand in a new market.

In your business plan you'll set out the steps you need to reach that destination. You'll identify your current strengths and weaknesses, also the opportunities and the threats.

The business plan will detail the actions you need to take, along with their anticipated costs. These are likely to include:

• Purchase of stock or equipment
• Marketing costs
• Employment costs

Your planning will also factor in the impact of new revenue streams, when your investment in growth begins to generate new sales. This should lead into a cashflow plan, where you document projected income and costs over time. The cashflow plan will help you to see how much funding you need and over what period of time.

Step 2 Understand your current numbers

Having planned for the future, you also need to have a strong grasp of where your business is today. Without a realistic understanding of current income and costs and the cashflow associated with these, it's hard to plan for the future.

However, you also need to be aware of other numbers in your business, such as the value and type of assets that you have and the existing levels of debt and their associated repayments.

Most businesses carry some form of debt, such as an overdraft, a loan or credit cards. Alternatively, there could be an obligation to repay an external investor, such as a business angel. While the expectation of repayment may still be some way in the future, it should be factored into your numbers and planning.

If you're looking for funding for a major new initiative that will grow or transform your business significantly, this presents an opportunity to restructure your firm's finances. You could consolidate existing small debts, or even do away with them entirely by taking on funding in a different form.

Step 3 Research your options

When you're raising funds to grow your business there are a number of routes you can take. Your choice depends on factors that include:

• Your credit rating
• Your attitude to risk
• How much control you're willing to give away

You should consider taking professional advice about raising finance for business growth, drawing on the knowledge and experience of others. Be sure to take into account the impact of taxation on your decisions. Take a look at how similar businesses are financing their projects.

It's possible that some of the assets your business owns can be used as collateral for finance, or used in another arrangement to release capital, such as a sale and lease back.

Where appropriate, involve others with a role in the management of the business, such as directors and other senior staff.

One major decision will be whether you decide to raise debt finance or equity finance. You can read more about this in our article 'Choosing the right funding option for your business'.

The more information you can gather at this point, the better informed your decision will be.

Step 4 Create your finance plan

As you pull together all the information you can start to make a finance plan based on your preferred funding options.

At the heart of your plan will be a cashflow forecast, which sets out the incoming and outgoing cash movements over time. This can be built in a spreadsheet or in a dedicated finance modeling app. Building the plan in a spreadsheet or app should allow you to adjust it based on different scenarios, helping you to assess the impact of various changes.

You may want to create alternative plans, based on different approaches to raising the finance - such as taking out a loan over several years versus receiving investment from a business angel.

Step 5 Review your plan in detail

Share your financial plan with others to get their feedback. Encourage them to question your assumptions and to suggest alternative options. The larger the project, the more important it is that you have a finance review by a professional, such as your accountant. An objective opinion from someone outside your business can be hugely valuable, particularly when they have experience of finance planning for similar projects.

Step 6 Source funding providers

Having thoroughly researched, built and tested your finance plan, it's time to approach potential funders. This could be a bank, a venture capitalist or a business angel, or some other provider of business funds. Your planning will have helped you identify at least one, and possibly several, funding options.

Depending on the scale and basis of the funding you're looking for, potential providers will have different questions and require specific information from you. This can include:

• Your firm's past financial performance
• How your business is managed
• Projected future cash flows

This information, along with other details about your proposed project, will be easy to supply if you've done a thorough job of your finance planning.

Funding your business project with Qardus

We work with owners who are looking to grow their small or medium-sized business. Having already proven their product and their process in the market, they're now seeking funds for major growth initiatives.

The funding we provide is from £50k to £200k with terms of between 6 and 36 months.

We're different from banks and most other UK finance providers because we don't charge interest. Our funding arrangements are rooted in Islamic community principles and are certified as Sharia-compliant. This also means we don't work in business sectors considered damaging to society, such as alcohol, tobacco or gambling.

Because of our principles, our funding solution is proving a popular choice not only with Muslim business owners, but also with others committed to ethical and community values.

Talk to us about getting access to fast and flexible growth finance.

The current cost of living crisis in the United Kingdom is affecting everyone. For many households, this is the highest squeeze on their finances that they have experienced. Many people are being forced to take measures in order to stay afloat. The cost of food, goods, and utilities are continuing to rise at an alarming rate, and people are having to make smart financial decisions.

According to recent statistics, up to 18 million households could face fuel poverty by January 2023 due to the ongoing energy crisis. Many of these families will have to decide between heating and eating. Investment bank Citi estimates that the UK consumer price inflation could reach 18% by early 2023. This will not only affect the finances of couples, and families with children, but almost everyone in the country.

This is why it is vital that you make smart financial decisions that could help you ride out this current cost of living crisis.

Let's have a look at some of the ways in which you can make your money go further.

Plan And Budget

One of the best things you can do is prepare a spending and budgeting plan. This will help you identify if you are overspending and examine those areas where you can cut back and save costs.

For example, do you still need to have a full Sky TV package? Can you get a cheaper broadband deal? Do you have any subscriptions that you no longer need or use?

Go through each direct debit and see if you can reduce or remove it. Check what you are paying for your smartphone packages and see if these can be reduced in any way. Ring your providers and ask them if they have any better deals on offer that could lower your costs.

Track all of your expenses and payments. This is the only way that you can successfully budget. Information and knowledge are power so use them to your advantage. Create a spreadsheet or table that lists all your incomings and outgoings, and then have a close look at where your money is going.

Muslims will already be used to the concept of planning and budgeting as they have to reconcile their finances and accounts every year in order to calculate their zakat calculations.

However, it is a good idea to keep a more regular eye on your finances, and remember that any drop in your income and savings may also affect your zakat and sadaqa payments.

Live Within Your Means

This is really important. It sounds so simple, but many people in the UK live beyond their means and this means they will struggle during the recession.

Having debt is not so much of a problem when times are going well. However, if you fail to make your repayments things could go wrong very quickly.

There is a famous Arabic proverb that states 'cut your coat according to your cloth'. Essentially, this encourages us to live within our means and not overstretch ourselves financially.

Islam does not look favorably on those who spend excessively and keep increasing their debt. We should all be looking at how we make use of our resources and expressing empathy for those less fortunate. Managing our finances well is something everyone needs to do, and needs to learn to do better.

Pay Off Debts

It might sound obvious but it is vital that you pay off any debts that you are able to. There are many online debt advice helplines that offer you recommendations and a guideline to help you reduce your debts.

You should prioritize paying off any debt, especially if it is a debt that accrues interest. Interest is not only strictly prohibited in Islam, but is also detrimental on your finances as the interest rates are likely to continue to increase.

If you can, pay off your debts.

Do Not Accrue New Debt

If you are thinking of taking on a new loan or new debt then think twice. Especially if the debt will be accrued due to a purchase that you do not necessarily need.

The same applies to buying things using your credit card. Now is not the time to be accruing more debt that incurs interest.

Start Saving Now

If you can, start saving now. It is never too late to start saving. Good financial management not only means monitoring your spending habits, it also means looking at your savings strategies.

You may need to undertake an evaluation of all your incomings and outgoings to see if there is anything you have left to save. If you do, even if it is a small amount, it is never too late to start saving.

If you do not have an ISA now is a good time to find information about what savings products are out there. For Muslims, there are some halal savings accounts that do not pay interest.

These halal savings accounts offer the same banking services as conventional savings accounts without interest.

Set Savings Goals

Set savings goals for yourself. This could be as little as saving £10 a month, to saving much more.

If you are saving to buy your first home, then you will likely be impacted by the increase in interest rates.

Look for banks and lenders that offer halal mortgages based on Islamic finance principles. Halal mortgages tend not to be as dependent on standard interest rate fluctuations and offer more stable repayment options.

Invest

Many people are scared of investing during a recession or economic crisis, but there are some good investments out there that can generate revenue and income.

Do your research and have a look at what investment opportunities are out there for you.

Investing in the right funds, stocks and bonds can be inflation busting. If you do your research you could find investments that offer a good rate of return. For Muslim investors, there is a range of halal investment options on the market which tend to be more stable than the conventional stocks and shares.

If you want to minimise the risk when it comes to investing, then try not to be too exposed to a limited number of sectors or assets. Diversifying your portfolio via investment is a good way to spread your money with less risk.

Think About Side Hustles

Side hustles have become popular in recent years when it comes to generating additional monthly income. Some low cost side hustles that have been successful in recent years include the following:

• Amazon selling
• Etsy selling
• Selling digital art and services
• Creating a website
• Freelance graphic designing
• Freelance writing
• Blogging and vlogging
• Social media influencing
• Shopify
• Dropshipping
• Creating online courses and offering advice
• Affiliate marketing and advertising services
• Starting a podcast
• Using comparison and cash back websites

These are just some side hustles that require very little financial outlay at the start.

Undertake Due Diligence Before Making Big Financial Purchases And Decisions

If you are thinking of making a big purchase such as a home or a car then make sure you do all the necessary research. Use comparison websites to find the best prices for things like electrical goods and holidays.

When it comes to home purchases, remember the housing market is likely to undergo some change in the coming months.

It might be better to sit tight to see if there is a fall in house prices. You should also look at different funding options such as halal mortgages. These types of mortgages tend not to have fluctuating rates as they are not interest based loans.

Take Your Time - Don'T Be Hasty

This is important. Now is not the time to make rash decisions or rush into big purchases or commit to long-standing and expensive monthly subscriptions.

Whether it is a smartphone or a new streaming service, take your time in deciding whether you definitely want to commit some of your monthly income to it.

WHAT IF YOU ARE SELF-EMPLOYED?

For the self-employed there are some additional concerns during a recession. For a start, whilst you may already be accustomed to fluctuating monthly income, you may see a drop in overall income as your customers feel the pinch and cut back on their spending.

Rising inflation is likely to affect all businesses, irrespective of size and industry.

Now is a good time to look at your personal finances, and check to see that you can:

• meet your mortgage repayments or rental payments
• meet all your essential direct debit payments for things like utilities
• have enough money to cover food and groceries for at least 3 months
• have some savings to fall back on in case your monthly income drops
• cut back on any non-essential items of expenditure

Some Ways You Can Protect Your Money

The Bank of England recently raised the interest rates. When this happens, it is usually an indication that the Bank of England wants people to start saving more and spending less.

Some ways to future-proof your money and savings include the following:

• Pay off as much of your existing debt as you can
• Make changes to your living standards that would bring your costs down
• Check to see if you can consolidate any of your debts
• If you have investments, check up on them and see how they are performing
• Save for a rainy day - even a few pounds a month will soon add up
• Track your spending by separating your wants from your needs
• Limit spending on gifts
• See if you can fix your mortgage if you are currently on a variable rate, there are some deals to be had out there

The COVID-19 pandemic has not only resulted in a public health crisis, but has also increased poverty levels and accelerated inequalities across the world. According to a recent survey of 37 countries[1], since the start of the pandemic:

• 3 in 4 households suffered a reduction in income with 82% of poorer households affected.
• Gender inequalities are on the rise due to consumer-facing industries being hit the hardest.
• Minorities in high income countries have been hit hardest as they live in areas that have been most vulnerable to the health and economic impacts of the pandemic.
• Inequality is also rising between countries as high-income countries have been better placed to provide financial & social safety nets to counter the crisis relative to poorer countries.

On the other end, the wealth gap is also widening as billionaires saw their wealth rise 27.5% to £7.9trn between April to July this year with their total numbers increasing to a record 2,189 (2,158 in 2017)[2]. This generally reflects the strong performance in global stock markets since the start of the pandemic.

As nations across the world attempt to cope with the crisis, they might be able to draw upon mechanisms that were used historically in the Muslim world in order to reduce poverty and income inequalities. Some of these mechanisms highlighted below, when used correctly, might serve to soften the blow by allowing for the systematic redistribution of wealth in society. These include amongst others access to a unique financing type as well as well as other mechanisms for income redistribution:

• Qard Hasan (benevolent loan) is a loan that is extended from a lender to a borrower for social welfare purposes. Through this mechanism the rich are encouraged to extend loans to the needy. The lender has no right to demand any amount in excess of the original principal amount as that would violate the prohibition on Riba (interest or usury). When used on a broad scale, this type of financing serves as a tool to not only reduce income inequality and alleviate poverty but also promote financial inclusion.
• Zakat and al-Khums (compulsory charity) and Sadaqa (voluntary charity) are mechanisms for income redistribution from the rich to the poor. Zakat, for example, a mandatory almsgiving that requires Muslims who own wealth at or above a certain threshold to donate a portion of it, typically 2.5%, to those who are eligible.[3]
• Historically, Awqaf (endowments) or the waqf (singular) played a pivotal role in socio-economic development across the Muslim world. They were important Islamic financial institutions that mobilized and facilitated the flow of funds towards philanthropic causes such as in order to fund education, health & libraries amongst others.

To varying degrees, some of these mechanisms are currently being used in various parts of the world, whereas others (ex. Waqf) are no longer as prevalent as they once were. Having said that, more has to be done as nearly all economic indicators suggest we have reached a tipping point with high levels of poverty and income inequality across the world. Efforts by policy makers to address these issues by preempting them could involve integrating such mechanisms as well as others in order to allow for a more equitable distribution of wealth and income. This in turn would create the foundations for resilient systems that are better able to cope with shocks as they appear.

[1]https://www.weforum.org/agenda/2020/10/covid-19-is-increasing-multiple-kinds-of-inequality-here-s-wh...[2]https://www.bbc.co.uk/news/business-54446285[3]https://nzf.org.uk/about-zakat/purpose-of-zakat/