Running a small business is challenging. You don't always have access to the cash flow you need to grow the business. Often just getting invoices paid by customers on time to make payroll is a challenge, let alone rolling out new products and keeping up with (or preferably leading) the competition.
Here we provide some quick fire tips on how to manage your small business finances to maximum effect.
Here we provide some quick fire tips on how to manage your small business finances to maximum effect.
1. Manage Cash Flow
Most businesses fail because they run out of money not because they do not have enough orders or sales.
Cash flow needs to be monitored on a regular basis. You should calculate what needs to be paid at the beginning of the month and then ensure you have sufficient customer payments to meet all your payments. You will now know fairly quickly if you have a shortfall and will then be in a position to discuss the situation with your suppliers if you have to delay a payment. A supplier who is advised that there is a delay in payment will be much more supportive if they are advised in advance rather than the last minute.
Cash flow needs to be monitored on a regular basis. You should calculate what needs to be paid at the beginning of the month and then ensure you have sufficient customer payments to meet all your payments. You will now know fairly quickly if you have a shortfall and will then be in a position to discuss the situation with your suppliers if you have to delay a payment. A supplier who is advised that there is a delay in payment will be much more supportive if they are advised in advance rather than the last minute.
2. Find a good Account and/or Business Adviser and speak with them regularly
A good accountant can provide sound advice on your business planning and management. Don't just look to them for your tax affairs management. Accountants work across a range of businesses, so have great insights when it comes to a number of issues and challenges.
It would be worthwhile asking your account about what is an acceptable level of communication in a month for the fees they charge you, before you send them a deluge of questions every day.
Seeking out a business finance adviser, such as Hugh Craen, or a business mentor can also prove very fruitful. External advisers are not swayed by internal politics and can provide your a clear and balanced judgement on important decisions.
It would be worthwhile asking your account about what is an acceptable level of communication in a month for the fees they charge you, before you send them a deluge of questions every day.
Seeking out a business finance adviser, such as Hugh Craen, or a business mentor can also prove very fruitful. External advisers are not swayed by internal politics and can provide your a clear and balanced judgement on important decisions.
3. Build a good relationship with your suppliers and customers
A good relationship with both of these parties will be a great advantage when times are both good and bad. When times are good you can discuss new product ideas before the competition gets the chance, as you have built a relationship that means the door is always open. When times are bad there is always scope to discuss longer or shorter payment terms, changes in products to reduce costs or increase margins.
These are just a few examples, each business is different, it's up to you to find out what a strong business relationship really means.
These are just a few examples, each business is different, it's up to you to find out what a strong business relationship really means.
4. Keep your accounting records up to date
Not only is this sensible for tax purposes (which we won't go into here), but month to month you can review spending and identify where you may be able to reduce costs or increase spending on items that have a positive impact on cash flow and profitability.
For example, you may find reducing spend on items such as travel, because you can manage more meeting online/telephone, saves a considerable sum of money and time. However, to do this well you need to improve your computers or phones. Making an investment can often pay off, but you need to know what the costs and savings you are to make a quantified judgement.
For example, you may find reducing spend on items such as travel, because you can manage more meeting online/telephone, saves a considerable sum of money and time. However, to do this well you need to improve your computers or phones. Making an investment can often pay off, but you need to know what the costs and savings you are to make a quantified judgement.
5. Avoid Bad Debts
In order to avoid bad debts ensure you have a sound credit control policy. Use a credit agency such as Creditsafe to investigate the credit worthiness of potential customers and set a limit on their account. Once a limit is set monitor the payment performance of your customers and their credit rating. The limit can then be increased or reduced according to their payment performance and credit limit recommended by the credit agency.
You will find that your suppliers will set credit limits on your business so this is not something that will surprise or upset your customers. A sound credit policy will also ensure that your business will be more attractive to any invoice finance should you seek a funding facility.
You will find that your suppliers will set credit limits on your business so this is not something that will surprise or upset your customers. A sound credit policy will also ensure that your business will be more attractive to any invoice finance should you seek a funding facility.
6. (one extra!) Keep a cool head
If and when things get tough don't lose your cool. Deal with any issue as soon as it arises as problems do not go away they just get bigger. Discuss key problems with your advisor or mentor at an early stage.
Remember the stakeholders in your business, shareholders,funders, customers and suppliers will want you to succeed so will be happy to work with you to overcome your problems.
If you'd like any more advice or have thought above developing improved cash flow through solutions such as Invoice Finance, contact us to find out more.
Remember the stakeholders in your business, shareholders,funders, customers and suppliers will want you to succeed so will be happy to work with you to overcome your problems.
If you'd like any more advice or have thought above developing improved cash flow through solutions such as Invoice Finance, contact us to find out more.
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