Managing Money – 5 Steps to Greater Stability
There are many reasons why a small business fails, but in many cases the problem lies with cashflow. Here are tips for managing startup finances.
1. Fail to plan, plan to fail
There is no such thing as a completed business plan. A business plan is a working document that should, both in theory and practice, evolve over time as a business develops and grows.
In terms of managing business finance, look at what the current position is, based on past performance create a plan for the next financial year.
Take time out to think about any capital purchases that may be required, materials, marketing costs, staffing etc. This should provide a benchmark as to the level of income and expenditure required to keep things afloat, in accordance with new objectives.
2. Get educated
Gone are the days when business owners and entreprenuers can get away with the excuse of “not knowing how to manage accounts” in order to manage business finance effectively.
There are a wide range of online training providers that offer free accounts and book keeping training. If accounts and book keeping is not your strong point, it may be worthwhile to take advantage of the free training that’s available and boost your skills on this area.
Even if the business has its own accountant, owners still have a responsibility to instruct accounting practitioners to act on their behalf. Knowledge of best practice in this area will enable you to have a better understanding of the business’ financial position at any given time.
3. Choose the right system
By now your business should have progressed beyond the point of using excel spreadsheets to manage financial performance. If not, why not?
There are a wide range of free and fee based accountancy software packages available, that enable businesses to integrate their accounts with point of sale and CRM systems. Ask yourself:
- Is the current system in place, fit for purpose?
- Does it need to be updated?
- Could the business benefit from a system that has multiple features enabling real time accounts and management reports to be created?
If the answer is yes to any of these questions, carry out some research and get familiar with the different accounting packages available. Choose a package that meets your requirements and get going.
A lean business is one that has the capacity to make profit, why; because a close eye is being kept on costs. Take time out to evaluate operational and or production costs. Establish areas where costs can be reduced.
- Can supplies be purchased for less?
- Can any services currently being outsourced, be brought inhouse for less or visa versa?
- Are the right prices being charged?
Put together a wish list of things that you would like to have in place, and things that need to be in place for the effiecient running of your business. Then create a plan of action and start working towards making savings where possible.
4. Invoice Promptly
Late invoices = late payment, it’s that simple. Get into the habit of sending out invoices on time, or invest in software that generates and sends invoices, as and when sales are generated.
As mentioned above, there are many free software packages available for small businesses, so having the right system in place doesn’t have to be expensive!
Sending out an invoice on time does not necessarily mean the business will get paid on time, so always ensure a system is in place for chasing late payments.
Time waits for no – one. One of the most common characteristics many business owners share, is lack of time.
Use your diary effectively, and ensure that time is set aside each week to update and monitor business accounts. In addition, take time out once a month to assess overall performance.
5. Get advice
If in doubt, speak to an expert about tax planning for the next financial year, VAT, cost reduction, strategic planning, marketing etc… Your local Chamber of Commerce may be able to provide information about free or subsidised services local to you. You can also speak with a business mentor who can give you some additional guidance.