With the 2016 well and truly behind, it’s time to reflect on some of the key financial lessons learned by small-business owners. Here are some of the things they said were important for the continued growth and success of the business.
Be involved in cashflow management
The benefits of understanding the likely cash in and cash out and tracking actual cashflows can mean the difference between keeping the doors open and closing them permanently. In particular, if you’re a B2B whose sales cycles last months, or even years, having extra cash in the bank can mean the difference between being able to stay in business and having to fold because your cash has dried up.
One of the other fastest cashflow killers is unpaid invoices from clients. Make sure you know who your debtors are, keep on top of them for payment, consider implementing late payment penalties or discounts for early payment. Most small businesses that fail say that had to “close up shop” because they didn’t have sufficient cashflow to stay open. Don’t become one of the stats.
Get into the cloud and get information on time
With the proliferation of cloud-based business tools, it’s easier than ever for small businesses to know exactly how they are performing on a regular basis. The days of when finance tracking was a static spreadsheet or you had to wait for financial statements to be prepared and presented by your accountant once a year at tax time is no longer necessary.
Access to performance figures such as operating profit, trading stock levels, costs of goods sold and cost of debt enable more meaningful financial decisions to be made on a timely basis that can make a significant improvement to the bottom line. A paperless solution and organising everything on digital platforms can enable you to keep tighter and more efficient records for tax purposes.
Get expert’s help, don’t waste your time
Get the experts to help. Don’t try and do it all yourself. Having those meaningful conversations with your accountant on a regular basis and getting the right advice upfront can be the difference between achieving successes and no growth.
Budgeting and planning – it’s worth it
Over 50 per cent of small-business owners said they “jumped right in” when it came to starting their business, and almost 80 per cent of them said that doing so caused them to deal with a few financial lessons from hardships early on due to lack of planning. This may seem like a basic lesson but certainly worth remembering not only before diving in but is just as important for the continued success of any small business.
Make sure your insurances are relevant and up to date
Don’t get stuck without adequate insurance to protect you and your business. Don’t think it won’t happen to you. Take the time to review your business, product and public liability insurance policies. They should be relevant and up to date.
Siobhan Sellick, Director, Prosperity Advisers Group