As a small business owner, it is required you manage your finances better. Paying wages, purchasing products, or investments in the infrastructure, you cannot probably get on with everything if you are lacking a proper business cash flow management model.
During the fourth quarter of FY17, after surveying more than 1,800 SMEs across UK, Germany, the US, France, and Italy, C2FO Working Capital Outlook Survey found that 54% of SME’sconsideredcash flow problems as their biggest growth obstacle.
Majority of small business owners are facing the heat due to late payments from their customers. Increase in the working capital gap they are forced to approach high-interest loan. The whole scenario is affecting their ability to grow efficiently in the dynamic market. Even if the sale numbers are high, a seemingly profitable business can go bankrupt if their financial health is not smooth.
As a small business owner, it’s natural on your part to feel money management is hard, but it is not something that cannot be achieved. In this post, I have listed few tips that will help you stay on top of your small business finance. Better finances imply you have better opportunities growing in the market.
- Keep Track of your Accounts Receivables
Your customers are happy. They value your products and are seemingly enjoying your flexible credit terms. But are you content with how things are moving? – You are not getting paid on time.
Your products are selling like hot cakes, but are you receiving payments on time? It’s a common trend small business follow. To expand their customer base, they provide huge credit terms, which leaves them dealing with huge cash flow gap.
It is necessary that as soon as you provide a service or sell a product, you prepare an invoice. Keep reminding your customers about payments because nobody else is going to do that for you. Use software tool for the job. It would be easier to track and manage accounts receivable.
Getting paid early, you can pay your vendors on time and you will find no burden managing your finances.
- Keep an Eye on your Inventory
The amount you spend on inventory can impact your small business cash flow. It is necessary you make inventory management your top priority; otherwise, you’ll lose your marketplace even before you sell those products.
Inventory management doesn’t essentially mean you have to be under-stocked. You have to be efficient within your business operations. For instance, if you are still one of those people who count inventory by hand then its’ time you change your habit. You have to automate your inventory management system.
It’s possible your numbers are wrong and you may overstock. Suppose, if you are selling cosmetics or food items you can avoid spoilage and save a huge chunk of money from going waste.
Additionally, you can prevent the stock from going waste. If the sale rate is low, you can give discounts and encourage customers to buy those items. Avoiding over-head costs, unnecessary expenses, you can manage finances better and keep away from cash flow problems.
- Use Prepaid Cards
Has there been any day when you have not felt burdened with your corporate expenses? Of course, you cannot avoid them, but certainly, you can keep the expenses from going overboard.
When you have client meetings or other regular business expenses, it is normal you provide employees with either cash or credit card. Such instances, you will have less power over how the cash is being utilized.
Prepaid cards work similar to credit cards, but you will have the option to load a defined amount. You can make sure there are no overhead expenses and have everything carried out as per your budget.
I am Sophia an avid reader and prolific writer. A Small Business owner by profession and a writer by passion. I am crazy about playing indoor games and cricket.