4 things to do immediately to improve your small business finances
You’ve got ambitious plans for your business. You can see an exciting opportunity, and it could mean stellar growth if you play your cards right. But are you ready to take a risk and expand? Unless you start off on a sure footing, things could go badly awry.
Having a good grip on your business finances is critical for profitability and growth. Here are four things you should do right now.
1. Get organised
Given you’re still in growth mode, busy building your business, sales and strategy are probably your priorities. You feel you need to invest all your time and energy in profit-driving areas, while you brush your paperwork aside for a rainy day. No wonder it ends up in a complete mess.
Worse, how can you possibly develop a strategy and track how you’re progressing if you have no idea of your financial situation? The first thing to do is get organised. You want to get on top of your finances: from revenue, cost of sales, overheads, expenses to your margins and profit.
Then you can start your planning from a solid and accurate base of current data. Planning properly for growth means you’re more likely to run a successful and sustainable business as you can make well-informed decisions efficiently.
2. Fix your processes
There seem to be a hundred and one things to deal with on a daily basis when it comes to accounting tasks. You have to produce accurate accounts, keep across profit and loss, manage your balance sheet, ensure your business is tax compliant and so on. Not to mention debtor and creditor management and that increasingly dreaded task, invoicing.
The good news is that technology can really help you out there. Simple accounting software can do much of the heavy lifting and help keep you shipshape. It can automate many of the above processes, thanks to features such as invoicing tools, inventory management, payment creation, sales and purchase approval, payment and receipts, as well as electronic BAS (business activity statement) lodgement.
It will also make invoicing a breeze, tracking and chasing payments for you, issuing payment reminders and arrears notices. As well as alerting you if a payment hasn’t arrived. It’s like having an extra employee helping you out: except it’s better as it will never forget anything or miscalculate.
3. Create a plan
When in fast growth mode you need a strategy that takes a holistic view of your business. You can’t pour all your resources into expansion: you need to continue the everyday running of your business as well as plan for emergencies. Your computer might get stolen or catch a virus and you could lose your data, or one of your debtors may declare insolvency meaning you don’t get paid.
In 2012/2013 42% of businesses went out of business due to poor strategic management. You don’t want to be part of that number. So assess your finances, figure out what you can safely afford to invest in your growth, and draw up a sustainable strategy. You don’t want to be stretched to the limit every month while you’re winning new customers, or trying to figure out how to best service their needs.
You can use accounting software to get a bird’s eye view of where you are. It should be able to show you in a single, simple interface exactly how things stand across your business. Then create your plan and set your targets.
4. Assess your progress
Keeping continual track of how you’re doing with your strategy is vital. You should assess week by week where you’re at, so you can adjust and fine tune depending on progress.
Figure out your core metrics and measure them continually. You don’t have to wait until the end of the month to “report” on your progress, let alone the end of the financial year. It needs to be a constant process where you analyse, review and improve. Understanding exactly where you are allows you to plan better, avoid common pitfalls, cash crunches and drive growth more effectively.
All businesses need a vision and a strategy but, they also need to be organised and efficient to realise their goals, as well as know whether they’re achieving them. You want to be successful and enjoy the fruits of your labour. So put in a little extra hard graft now, and set up the processes and plans that are going to help you run like clockwork in the future.
If you’d like more of a detailed insight into some of the manageable, cost-effective steps you can take to resolve key problems when it comes to accounting and financial management for your business, download our free ebook below.