The focus every June can be on business owners “getting things right” to tidy up the end of financial year – but it can be just as important how business owners kick off a new financial year.
At EOFY, time-poor business owners can feel the pressure of getting financial records and actions finalised. Before your focus switches back to day-to-day business activities, there’s one action that will stand your business in good stead,
As the new financial year starts, I’d encourage business owners to make the time to carefully assess your cash position. Outline your business goals for the next 12 months and take a good look at whether you have the right funding in place to meet those goals, because cashflow struggles can be one of the biggest killers in the SME sector.
Here is the business owners’ new financial year checklist:
Taking time out to review where you are today and where you want to go over the coming 12 months is essential and can reap great rewards. Bounce these thoughts off friends, colleagues and advisors, to help validate and improve your plan.
The saying goes “Cash is King” and in business it beats everything else, Many successful growing businesses fail, despite growing order books and good margins. There is such a thing as “over trading”, where commitments cannot be kept up, as the cash isn’t coming in quickly enough.
Review how quickly you have to pay suppliers and staff and compare that to how quickly cash comes in. Model this to ensure you have enough cash to fulfil your 12 month plan.
The benefit of good cash flow management is a cash injection into the business, increasing your purchase power and strengthening your supplier relationships through improved ability to pay promptly.
Make sure that current funding lines for your business are both adequate and structured in a way that can support your upcoming requirements.10
Make sure flexible funding lines are in place to meet everyday demands on the expenses that move most frequently, such as suppliers and wages.
Consider facilities that are flexible and can grow with you, being linked to the success of your business – facilities such as trade and invoice finance. Consider the security being offered and whether you are risking your personal assets such as your home. By leaving your personal assets out of the equation for your business lending, you can leverage these assets to build your personal wealth.
Make the change today. Don’t wait until the need is already upon you or you will rush things, which can mean not being in a position to negotiate a good deal and in some cases, you may be forced to take an option that in the long-term is not good for business.
Talk to a trusted advisor (perhaps an accountant or broker) about working capital options that actually fund business growth. It’s not too difficult to put in place the right commercial framework for your business, that helps it not just survive but thrive.
Don’t wait until the last minute as it may be too late.
Peter Langham, CEO, Scottish Pacific