It only seems like yesterday that I completed my studies to be a Chartered Management Accountant but since then I’ve worked with an incredible array of businesses and organisations that have helped me develop my knowledge and skills, through the need to overcome virtually every challenge that you can imagine.
I’m very passionate about sharing my knowledge to support the development and scaling up of small businesses, so I’m very pleased to share my top ten tips to improve your business finances
1. Alter your mindset This may sound like a strange one but it’s often the most important one. Managing your finances is vital for the survival and growth of your business, but far too often it’s something that gets pushed to the side as an inconvenience.
Best practice financial management involves the planning, organising, controlling and monitoring of your financial resources in order to achieve your business objectives and reach your aspirations. This all helps to ensure that you make the most effective use of the money and assets in your business.
Financial management should be included in your key business processes and it’s something that should be done regularly, and not sporadically.
2. Write a business plan A business plan is a roadmap
Where you are now?
Where do you want to be in 5 years’ time?
How are you going to get there?
Set targets to give you and your team clarity and focus. You’re much more likely to reach your business aspirations if you take the time to plan.
3. Monitor your financial position
Complete a mini profit and loss every month and review it against your business plan. Are you heading in the right direction? If not, what changes do you need to make?
Cashflow forecasting is imperative so you can be prepared for every eventuality.
Monitor performance against targets that you set in your business plan on a monthly basis and don’t be afraid to refresh plans when necessary.
4. Get your customers to pay on time Cash is the oxygen of any business. Your business will suffocate without enough cash to pay staff, suppliers and meet tax commitments.
Even profitable companies can run out of cash so ensure that you proactively manage your client relationships and invoice terms.
Gone are the days of ’30/60 days as standard’. Clients now understand and expect variable payment terms, which can include options like pre-payment and scheduled payment plans.
5. Understand your costs
It’s important to fully understand the cost drivers in your business.
Closely monitor the expenditure and really challenge the validity of everything. What’s the return on investment and does it stack up?
Key things to consider are any subscriptions, marketing costs, utilities…Are there better options out there?
6. Always meet tax deadlines
For the financial credibility of your business and to ensure that you don’t incur fines and interest, ensure that you meet the deadlines for filing your tax returns and making the necessary payments.
7. Control your stock Ensure that your stock control is efficient. You don’t want your capital tied up unnecessarily in excess stock.
However, if there are time considerations in terms of restocking, you need to bear these in mind to manage customer expectations.
The key here is to get the balance right.
Make sure that you have systems in place to monitor and manage stock levels.
8. Get the right funding
It is essential that you choose the right type of finance for your business. Each type of finance is designed to meet different needs.
Smaller businesses usually rely more on business overdrafts and personal funding but this might not be the best kind of funding for your business in terms of managing repayments and fulfilling your growth potential.
9. Deal with problems early
Don’t stick your head in the sand and hope the problem goes away. Stress builds up the longer you leave something. Medium to long term stress will affect your performance which in turn affects your business performance.
10. Work with the right people to manage your finances
Whether you work with me, another Virtual Finance Director or an inhouse Financial professional, ensure that you’re working with someone that’s prepared to get a full understanding of your business challenges and aspirations, whilst reviewing your finances holistically.
I could obviously make this a very long blog but I appreciate that you’re a very busy person. If you need support with developing tailormade processes within your business, let’s meet for a virtual or a real coffee.
Book a curiosity call with me, give me a call on 07724 711637 or pop me an email at email@example.com