1) Manage Your Cash Flow As the saying goes, “cash is king.” The easiest way for a business to fail is to run out of cash. You may be rolling in orders, but if your debtors are not paying you on time, it is easy to fall behind on your financial management. Stay on top of people who owe you money. The squeaky wheel gets paid first. If it’s hard for you to ask people for money, delegate the task to someone who’s great at it.
Even if you are getting paid on time, have you analyzed your “order-to-cash” cycle? Many businesses require cash outflow, say for making their products, before the money starts flowing in. If this is your business, analyze your cash flow to make sure you don’t get caught by surprise, with no financing options to fulfill your orders.
2) Buy Smarter A smart business is one that controls costs as well as revenue. You should periodically look around for the best prices on everything, including office supplies, stationery, computer support, and even insurance. You don’t need to stick with your current suppliers if there are others who offer you a better deal, or even good credit terms. Look at volume discounts for frequently used items that are non-perishable. Take advantage of cash back rewards on your business credit card. Consider your biggest expenses and investigate whether there are ways to cut costs. Are you renting an office suite, where a co-working or a work-from-home hybrid arrangement would do?
3) Get Organized No matter how cozy your messy house is to you, as a business owner or finance manager, it is essential for you to get your financial house in order. Not sure how to start? Choose your biggest weakness. Are you losing receipts because they’re stuffed in your drawer, coat pocket, or wallet? Start with receipt management. Tools such as Expensify help you scan receipts, create reports, and analyze your expenses. Slow to invoice your customers? Buried under tax paperwork? Block out time on your calendar and tackle your mess. There are helpful tools and support resources for all of your organization needs.
4) Modernize Your Tools Speaking of tools, there are dozens of free or inexpensive tools available to help you improve your business finances. Wave is a free tool for invoicing, accounting, payroll, and receipt management. Freshbooks is a cloud accounting solutions for invoicing and time tracking. You can use Dropbox to store, manage, and share your files online. Need a way to keep track of your notes, ideas, and draft proposals no matter where you are or what device you are using? Try Evernote.
5) Make Your Capital Work for You So, you are now a well-oiled machine, with orders and cash flowing in, products and services flowing out, and paperwork and expenses under control. Are you prepared to grow? In order to manage continued operations, you need to have sufficient working capital. Working capital equal to your current assets (which includes cash, accounts receivable and inventory) minus your current liabilities (accounts payable). A healthy working capital ratio is typically 2:1. With your financial house in good order and your customers delighted, you can now prepare for growth.
Photo Credit: AMagill via Photopin cc