How you manage your finances as a small business owner can make or break your success. That’s why planning and organising your cash flow is critical. With just a few changes to the way you handle your money, you can better understand both your income and expenses to ensure you stay on target.
Here are 5 steps to organising your small business finances.
1. Using accounting software
A surprising number of small business owners are still not using any software to help manage their accounts. In fact, 18% of small businesses don’t use any form of accounting software, whether that be on-premise or cloud hosted. When you see statistics such as, businesses that utilise cloud based accounting have a 15% year-over-year growth in revenue, you’d expect to see a greater number of businesses moving away from Excel or paper-based accounting.
The biggest advantage to using accounting software is the reduced risk of human error. Although the risk of data input mistakes is still possible, accounting software will make many of the key calculations automatically, speeding up the process for you too.
Another major advantage to using accounting software is the value of reporting. The data captured by cloud-based solutions such as Xero and Sage make it possible to deliver real-time views of your financial position. This enables you to make better business decisions and highlights further savings.
2. Paying bills on time
Failing to meet payment deadlines can cost your business. Paying bills on time will save you money, it’s that simple. However, when money is tight, it’s easy to let payments fall though the cracks.
Neglecting your bills can reduce your business credit score, making it more expensive and difficult to secure loans. This will also impact how suppliers view the credibility of your company. Being consistently late on payments will have a spiral effect on your business, making basic operation costs more expensive. In short, be sure to pay your bills on time (if the funds are there) and you won’t run into any issues when looking for a supplier or bank loan. If the funds aren’t there, have you considered why? And do you have an accountant working alongside you? If not, contact us at HL&W today, we’d love to let you know how we can help make your business more successful.
3. Cut costs where possible
Running a small business isn’t cheap. From buying inventory, to paying employees, and keeping up with rent, your outgoings can build up relatively quick. Although these expenses are necessary to running a business, it’s usually possible to reduce these, helping to improve your profit margins and provide more stability in the bank. This can then be used to invest back into the business. To find areas when costs can be reduced, help from an accountant alongside accounting software will provide accurate data that can be analysed effectively.
Some ways your small business could cut costs may include:
- Reducing travel costs by arranging video conferences with long-distance clients
- Paying bills on time to avoid late fees
- Negotiating rates for products and services your business use
- Compare insurance quotes to find lower rates
- Bartering services with other businesses
- Improving the energy efficiency of your workspace
4. Getting paid on time
Your cash flow depends on being paid by your customers. What’s the good in having thousands of pounds worth of unpaid invoices sitting inside your account? Getting paid on time is vital but can be difficult in practice. If your small business is struggling with late payments, you may need to revaluate your payment terms. Be sure to send timely reminders alerting customers when their payments are due. Overall, you need to know the status of your invoices, which are outstanding, and which need to be chased. Don’t put your busines on the ropes because of unpaid invoices.
5. Expanding your resource
A significant reason to why many small business owners struggle to manage the financial side of their business is because their systems don’t grow with the business. It can be tempting to take on your own accounting in a way of reducing costs, but as your business grows, things can become complicated. As a small business owner, your time is extremely valuable. You want to avoid spending hours sorting your accounts and focus on creating new opportunities for the business.
The solution for this? Hiring a professional accountant to take responsibility of your finances. You’ll avoid mistakes, free up your own time, and save money in the long run.
If you’re looking for a small business accountant to help you succeed, speak to one of our experts at HL&W today. We’ll take your financial tasks into our own hands and help manage cash flow, budgeting, forecasting and more. Book your free meeting.