2 Key Financial Management Strategies for Small Businesses
From doing everything every day to maintaining a healthy business account, here are the two key strategies these experts shared.
Do Everything Every Day
Maintain a Healthy Business Account
Do Everything Every Day
I am a great believer in doing everything every day. This means that everything is up-to-date and that the company has real-time information.
What does that mean? Quite simply, ensure all processing is done daily. Complete the bank reconciliation, issue and process sales invoices, collate and process purchase invoices, and complete any other related financial administration. This is best done by engaging either a part-time or full-time in-house bookkeeper.
One of my favorite sayings is, “If you do everything every day, you are only ever a day behind.” This means that the business owner/shareholders/management can have daily, weekly, and monthly information and use it to run the business and make better decisions. Without this approach, the business runs the risk of making wrong decisions, and it makes forecasting much more difficult.
I operate on the basis that financial management is all about understanding where you are, where you have been, and where you are going. Real-time information provides the “where you are and where you have been” part, which aids in the production of timely management accounts, monitoring and managing of key performance indicators, and forecasts.
I like all businesses to have a 13-week rolling cash flow forecast, and an integrated monthly profit and loss account/income statement, balance sheet, and cash flow on a monthly basis for the current financial year and the forthcoming year. This drives performance, results in accountability, and provides a target and direction. It also allows the financing needs of the business to be established and funders engaged.
Make it simple for yourself and do everything every day. You will improve profitability, cash flow, and shareholder value, and make life a lot less stressful.
Craig Alexander Rattray, Growth Strategist, Know Your Numbers
Maintain a Healthy Business Account
As a financial advisor, the most important strategy to financial stability is not to make purchases you can't afford and to keep funds in the business account. By always maintaining a healthy balance in your account, it will allow you to:
Pay for expenses without worry.
Get approved for loans more easily.
Have less anxiety.
Now, obviously, in very special situations, it might be worthwhile to purchase items/services that aren't necessarily in your budget—for example, if the expense has a huge profit margin or is an unavoidable expense. But in general, try to keep capital in the business's bank account and avoid unnecessary expenses.
Sal F, Director