Make good financial housekeeping one of your New Year’s resolutions.
It’s not just individuals who should take time to reflect and make New Year’s resolutions for the year ahead. It should also be resolution time for SMEs, the sector that plays a huge role in the Australian economy and employs almost half of the country’s 10.7 million workforce.
There were three resolutions that SME owners and directors could initiate that might really make a difference to their business’ bottom line, and to its longevity.
Resolution 1: Pay more attention to cashflow management
With the most recent Scottish Pacific SME Growth Index, the poll of 1200 business owners showed that cashflow was the top concern keeping them up at night. So a useful resolution would be to improve cash management.
This time of year can be tricky for many SMEs, because of the annual seasonal post-Christmas cashflow dip. This can make it hard to meet outstanding liabilities on time – which can create issues for even strong, viable businesses around end-of-February Business Activity Statement payment time.
Many small-business owners are entrepreneurs who like to focus on exciting business ideas – which can mean they might not prioritise spending time on the “boring stuff” around systems improvement.
January is an opportune time to do the financial housekeeping and put more robust systems in place. Take some time to improve your invoicing process, to reduce the potential for disputes and improve on late payment rates. It may only take a couple of minor adjustments to really speed up the collection cycle, bringing more cash into your business.
Resolution 2: Shake things up if your working capital options aren’t working
The Scottish Pacific SME Growth Index found that very few small-business owners regularly review their finance – only 4.8 per cent actively keep an eye out for credit facilities that best fit their business, and 50 per cent never get around to reviewing their primary bank relationship.
January is a great time to really consider what working capital options are best for the business, and will enable it to grow with peace of mind.
For owners of high growth businesses who don’t want to tie funding of this growth to their own property, a good option could be debtor finance, a funding solution that grows in line with business revenues and which doesn’t require the family home as security.
Debtor finance is particularly helpful to labour intensive businesses where wages must be met, often long before the business is paid.
Growing businesses often struggle with cashflow, as they are taking on more staff or bringing in more stock while still having to wait 30 to 60 days to receive payment. Debtor finance allows them access to funds straight away, without having to wait for invoices to be paid.
Resolution 3: Find the roses, and stop to smell them
The most recent Scottish Pacific SME Growth Index found that almost 90 per cent of SME owners work more than 50 hours a week in their business, with 43.7 per cent toiling for 60 to 80 hours (the equivalent of a more than 12 hour day six days a week).
Long hours go into running a small business, and the 24/7 nature of digital technology means that business owners are always accessible. At this time of the year, it’s worth making time for a mental health check and making resolutions that work on an individual level to help small business owners achieve a better work/life balance.
This means not only taking time off to refresh for the year ahead, but building into your weekly calendar non-work meetings, events or activities that give you a break and bring you pleasure, so that you have more energy in the time you do spend in the business.
Wayne Smith, Head of Debtor Finance, Scottish Pacific