Small- to medium-sized enterprises (SMEs) face myriad challenges, not least the need to leverage a modest budget to achieve tidy profits against the backdrop a intense international competition. It’s certainly not easy to succeed when you’re facing down operations that are two or three times bigger than yours.
But let’s be honest. You didn’t get into business because you thought it would easy. You’re here to nurture a great idea and grow it into a legacy. Ambition is central to company’s success, but it’s still only part of the equation. Success also hinges on your ability to manage company finances. So if your business is going places, it’s wise to obsess a bit over the company’s financial data.
To that end, have a look at the following seven tips for managing finances and make sure you’re doing each of them:
- Plan ahead.
Too many SMEs are plunging forward without really knowing where they’re going. Without minimising the role that chance and the right-time / right-place effect of play in determining a business’ future, SME operators need to understand that creating a business plan is not optional. Having a plan helps navigate hazards, missteps and other problems along the way, as well.
- Focus on cash in hand.
Cash is King – you’ll hear this over and again, but that’s only because it’s incredibly important. Of course you want to be turning big profits and opening new markets. But without cash in hand, you’ll be stuck dead in your tracks. With that in mind, determine how much liquid cash your SME needs to operate on a monthly basis, and make absolutely certain that you have access to this on a continual basis.
- Keep your books up to date.
Bookkeeping is boring, tedious and – let’s be realistic – incredibly important. Procrastinating or (worse yet) ignoring your bookkeeping obligations is going to create nightmares when it comes time to pay your taxes. Hiring accountants in Australia, or anywhere else for that matter, is not terribly expensive and could even end up saving you more than it costs. Failing to do so is tantamount to negligence.
- Know your numbers.
Small businesses are volatile, and it doesn’t take much to send them down the path to financial ruin. With that in mind, monitoring your current financial situation is crucial. Regularly check the following figures:
- Company savings
- Sales revenue
- Product inventory
- Offer incentives for quick payment.
As a follow-up to the importance of cash flow, you’re likely to find yourself in situations where someone owes you money, fully intends to pay you, but hasn’t gotten around to it just yet. In other words, they’re looking after their own cash flow at your SME’s expense. Encourage faster payment through incentives such as a percent discount when invoices are paid before a set date.
- Mitigate your risk.
When operating an SME, you may end up feeling like a little fish in a big pond. Spread your risk out by broadening your business base, so that no single client has the power to ruin you by pulling out of a business arrangement. Keep an eye for clients on the verge of bankruptcy, potentially fraudulent operations and other external risks that could send disastrous waves through your company’s operations.
- Streamline company efficiency.
‘Efficiency’ is a buzzword, especially in light of the 21st-century Go-Green craze. However, it’s also a means to saving on expenses, and that’s never a bad thing. At the very least, consider replacing paper with its electronic equivalent, as doing so looks good to the public and saves money in the process (lots of it, according to Billentis). Embrace this.