Are you experiencing financial difficulties? Does insufficient cash flow often prevent you from reaching your goals?
If so, you are no different.
Unexpected financial challenges are most common among SMBs. Some are even struggling to manage basic expenses. Such difficulties have the most severe impact on small business owners who are operating with less capital. Often, they are more than just a few emergency setbacks.
“About 70% of small businesses shut down by the time they reach the five- year mark. Almost half of those shut down due to a lack of funds.”
There is no one-shot solution to random financial challenges except that you follow best accounting practices and find efficient and cost-effective ways of managing financial operations.
To help you out Mizael Partners, Australia’s top accountants present 10 best tips to manage finances in business –
- Identify and document essential business requirements
- Don’t go without the plan
- Budgeting is your best friend.
- Maintain an Emergency Fund.
- Outsource important and emerging tasks
- Make Sure You Get Paid (Track receivables)
- Negotiate long-term contracts
- Save money on overhead costs.
- Stay on top of day-to-day expenses.
- Hire professional accounting services when you need them.
1. Identify and document essential business requirements.
Identifying what and where you require to invest is the first step to achieving financial freedom for your company. When you know your financial affairs back to front, you enable yourself to stay on top of your finances, avoid fixed or variable business expenses and debts, also be sure the cash keeps flowing.
All top accountants in Australia who offer financial assistance may always start by assessing your current financial situation, to create a better plan for future.
2. Don’t go without the plan.
There is nothing better than having a roadmap to track and manage your financial information throughout the year. While all business issues will always need to be resolved in real-time, your finances require a plan. It includes a list of all the identified expenses and investments, fixed or variable, and should be simple to understand and easy to execute, considering your present financial situation.
3. Budgeting is your best friend.
Scrimping on personal expenses may not help you every time. There can be times when you will need to keep your typical and necessary business expenditures under control as well. At such phases, having a clear budget could be the most crucial weapon of business strategy.
An appropriate budget guides you to make informed decisions about allocating your money and effectively running your business while foreseeing future growth, setting revenue goals, and handling expenses.
4. Maintain an emergency fund.
How do you manage a slow period in your business that results in you not turning a profit? Or what if your business fails? These are common scenarios for most small business owners who do not have a steady stream of revenue. Having and maintaining an emergency fund can help you get out of tricky situations.
During slower months or when you encounter unplanned expenses, having an emergency fund that covers your business and personal expenditures for at least three months will always be valuable.
5. Outsource important and emerging tasks.
Outsourcing describes when a business obtains a product or service from an outside provider rather than managing it in-house. Small businesses can get more done by outsourcing major tasks and processes to professionals without having to increase their full-time staff. It can impact various business areas to keep costs under control, increase efficiency, and focus on other business areas.
More than a third of small businesses have outsourced some of their operations. Even more companies will explore this option in 2022. So why not join the success lot for different and better outcomes?
6. Make sure you get paid (track receivables).
When you run a business, having a regular cash flow, and on-time payments is the best way of fulfilling your revenue goals. For a small business running without securing emergency funds to cover losses, tracking the dues and get them cleared on time is more crucial than anything.
A real-time invoice and tracking system will increase the chances that your business will survive and thrive in the long run. Also, getting paid on time can indicate a healthy cash flow and satisfied clients.
Things to keep in mind
- Send invoices as early as possible.
- Set payment deadlines for the due payments.
- Keep track of your pending invoices.
7. Negotiate long-term payments.
Reconsidering contract terms can be frustrating and time-consuming for both of you. You may end up losing a valuable client as well. We will not suggest doing it in the middle of the year or project but brainstorming more on the project requirements and payment terms.
You can consider implementing short-term payment model, be it monthly or quarterly billing. Also, you might think of adding prepayment and part-payment terms to your project on-boarding process.
8. Stay on top of day-to-day expenses.
When you are just trying to get work done, staying on top of your spending may be a huge task. Setting up a good strategy and then simply investing a little amount of time each day will simplify managing your costs.
If you still face issues, try these ways to stay on track.
- Identify daily expenses
- Keep them separate from other costs.
- Record every single transaction.
- Review your expenditures every now and then.
- Store all your receipts online.
9. Save money on overhead costs.
Small business owners may have to deal with various costs. Overhead costs can be one of those that may not directly impact profits but are critical to avoid.
Such overhead may include the hiring cost of temporary resources to handle on-demand tasks, travel costs, etc.
Keeping overhead costs low can be a one-stop solution to not being able to hire top talent or buy the equipment you need to manage your company. These practices may not benefit you in the short term, but they will undoubtedly improve your operational efficiency and add value eventually.
10. Hire professional accounting services when you need them.
If you are a small business, you can manage your finances like a pro by hiring a chartered accounting firm rather than employing a full-time accountant. Top outsourced accounting firms may be a little costly, but by carefully assessing your needs, you can choose the right one for your business.
Long story short,
We understand that running a small business takes time, effort, and money. It can present a myriad of challenges when you manage your finances. We hope the above tips will help you better manage your finances.
If you need help
As a leading tax accountant in Melbourne, we have created financial planning checklists, which include a list of necessary actions you should take to ensure effective management of finances in your organization.
We would love to speak with you today. Speak to one of our accredited accountants, call us on +61 466 228 000.
Visit https://mizaelpartners.com.au for more information.