How small businesses can manage their financial planning more effectively

save money, financial planning
Man planning family finance and using calculator. Counting savings, budget, taxes, expenses and living cost. Calculating money. Accountant working on table and desk.

All too often I see entrepreneurs put the financial aspect of their businesses on the back burner as their clients and customers become top priority. However, it’s important to remember that good financial health is what keeps the lights on, and this all comes down to effective – and ongoing – financial planning.

Carve out time for regular cashflow analysis

Whether big or small, forecasting and budgeting is essential to the success of every business. It allows you to assess your personal living expenses, fixed expenses, the salary you pay yourself and your profit margin, and ultimately determines your selling price.

But the thing is, many small businesses do their forecasting and budgeting annually, and then “set and forget” which can lead to poor decision making and detrimentally impact cashflow down the track.

It’s vital that you put the time aside to monitor, revise and update your forecasts on a weekly, if not more regular basis to ensure your budget reflects your actual sales and accounts for those unexpected costs that arise. This will then allow you to make informed conclusions about whether the business has the funds to invest in inventory, an extra employee, or other upgrades and improvements, or if these plans need to be placed on hold.

Negotiate payment terms, ensuring there’s a correlation between incomings and outgoings

When you bring a new supplier on board, aim for 30- or 60-day payment terms with them from the get-go, as this ensures you’ll avoid any fees associated with late payments. Consider working with your creditors on a mutually beneficial agreement to keep costs down too, such as discounted pricing or rates by agreeing to use their services for a specified period of time.

When it comes to your own payment terms, don’t just create them in advance, strive to commit to them. If you can, request full or at least partial payment upfront at all times, as late payments will impact your bottom line and ability to pay your suppliers and staff, which can lead to further liabilities and impact your cashflow.

Keep a constant eye on your calendar and time your outgoings – including wages – to reflect when you know you’ll have money coming in, so that you can make these payments and maintain positive relationships with the people and companies you rely on.

Put your tech to work

Chances are you’re already using some form of accounting, payroll and rostering software, but are you putting them to work from a planning perspective?

Make sure you’re getting the most out of these platforms by looking to them to create rosters weeks and months in advance. Plus, use their app functionalities in real-time to make staffing adjustments based on your sales to ensure you’re not losing out, and allow your teams to input their actual hours and apply for annual or other leave. This empowers them and makes it easier for you to track and retrieve new information as soon as it becomes available, as well as plan ahead – whether that means making roster adjustments or analysing the data to identify patterns over any given month or year, which can be used to influence future staffing decisions.

On the accounting side, use the live reporting functionalities to accurately view your GST, BAS, and other upcoming liabilities, as this will allow you to calculate your actuals, which will ultimately impact your future plans.

While it’s important to set long-term business goals, financial planning isn’t just about looking one or several years ahead, it’s vital you monitor how you’re tracking on an ongoing basis and prepare and plan accordingly. Don’t set and forget, instead, make it a part of your regular routine.