1. Regularly manage your finances – set aside time each week or month to update the business finances, when receipts and invoices build up it takes longer to sort out and you don’t have a clear idea of how well the business is doing.
2. Get a book-keeper – generally SME’s owners are too busy or disinterested in the day to day updating of their business finances, which means it ends up getting put off. Employ a bookkeeper who can quickly and easily do this for you.
3. Use software to help you - Accounting software can save time and if updated regularly (by yourself or a bookkeeper) gives a good, on-going view of business finances. There are plenty of packages out there (Xero, Quickbooks, Sage) depending on your individual business requirements.
4. Be aware of your income and out-goings – know what is coming into the business and going out and review it at least monthly. Run a budget/forecast and track against it, if you don’t know how to do this ask your bookkeeper whether they have a template or can pull it together for you. Remember “what gets measured gets done” having a target helps focus and see where things may be going wrong.
5. Regularly review costs – check on what you are spending… is money going out of the business for things you no longer need? Are there services you could review and save money on? Utilities and insurance are 2 classic areas for cost savings.
6. Keep receipts and purchase invoices – so many companies don’t keep all their receipts and purchases invoices and are therefore missing out on claiming back expenses and VAT. I know, dealing with receipts is a bore!! But, have a method and it becomes a habit…Scan directly to one of the numerous Apps out there to help with this, use the old-fashioned method of chucking them into an envelope, and/or have a folder on your email and dump purchase invoice emails into that.
7. Understand your cashflow - A lack of cash is one of the most common reasons why businesses fail. Even successful businesses can find themselves quickly getting into trouble if it is taking a long time to get cash in and they can no longer pay their bills. If finances are tight, run a cashflow forecast. If you don’t know how to do it, then get in touch, I’ve got a great template!
8. Set aside a financial buffer - Try and keep aside a pot of money equivalent to at least a couple of months of expenses. If the business does take a downturn in income this gives you a buffer.
9. Chase debtors quickly - the longer debtors are left the harder it is to get the cash! If you don’t like chasing, then get your bookkeeper to chase. In the majority of cases, it isn’t that people don’t want to pay you, sometimes it is as simple as the invoice going astray, but the quicker it is chased the quicker and easier it is to sort.
10. Pay creditors on time – be a good payer, I’m not advocating paying early, but likewise don’t pay late, it upsets suppliers and could impact your credit history.
11. Invoice regularly – send out as soon as possible after providing goods and services, to keep the cash rolling in.
12. Pay yourself – talk to your accountant about the most tax efficient way of doing this, but make sure you get regularly paid.
13. Invest in growth – but make sure you can afford it, do cashflow forecasting and break-even analysis to see the impact of investment on growth for the business. Could the investment push the company over the edge in terms of cashflow?
14. Set aside money for taxes and pay your taxes on time! – ask your bookkeeper to work out monthly what the likely tax liability is on your monthly Profit or Loss e.g VAT (if applicable), Corporation Tax, Personal Tax etc. Pop that money into a separate account and don’t touch it, so that you have it there when your tax bill is due.
15. Get a good accountant – as well as ensuring that you meet the statutory obligations for your accounts, a good accountant can look at your business finances and make recommendations as to tax efficient ways to manage the business, sometimes even saving you the equivalent of their annual fee and more in tax, making it well worthwhile.