We’re sure you’re already aware of how to manage the finances of a small business. After all, you are a small business owner, and the very fact that your business is up and running proves that you have done your homework. From raising capital to procuring financial resources to buying raw materials to managing cash flow for smooth daily operations – you’ve done it all already. But is it enough?
Every business must cross some tough bridges and unknown routes at some point in its growth journey. Navigating through tough times requires skill and expertise.
5 Ways to Better Control Business Finances for Growing Your Small Business
Although they are handled on a routine basis, business finances can become complex amid business uncertainty or during business expansion. Staying focused on your objective and tweaking your usual methods of handling finances to a “survive and thrive” model needs some extra work.
Here are five ways to navigate your small business finances out of trouble when the going gets tricky.
1. Budgeting
A business budget is designed with factors such as the current market scenario, resource availability, forecasting future trends, and the goals you wish to achieve in mind. A portion of the budget is also allocated for emergencies or market downturns to ensure that your cash flow is not significantly affected in times of crisis.
While all budgets are designed using these tips, it is necessary to remember that not all businesses are the same, and neither do they follow the same growth trajectory. Suppose your business is undergoing a significant expansion; the business budget you used for business as usual won’t suffice. You will need to incorporate capital expenditure, loan and other financing costs, as well as an increase in variable expenses.
Similarly, a major macro event, such as a new product launch or a tax change, has to be incorporated into the budget. For instance, the rising interest expense may necessitate a significant budget revision, diverting most resources towards accelerated debt repayment to reduce financing costs. The ultimate objective of a budget is to align with business goals and prepare for the challenges that lie ahead.
A CFO is skilled in handling such financial situations and restructuring.
2. Managing Expenses
An integral part of managing business finances is working towards operational efficiency. Being efficient is making every expense count and reducing wastage.
However, here’s a curious thing – a business looking to grow must increase its expenses in certain areas, such as marketing or customer acquisition. Entertaining potential investors or suppliers, offering free or discounted samples or services, and enhancing your advertising efforts can help take your business to the next level. At times, companies can overdo their marketing efforts and inadvertently harm their profits.
Keeping business expenses in check and strategically increasing them in certain areas is something only an expert can advise you on. At the same time, how to balance out these increased expenses by cutting down in other areas is also something you will need to work out carefully with a business consultant.
3. Managing Invoices and Payments
Growing your business requires money, and one of the most common reasons small businesses fall short of funds is delayed customer payments. As the invoice amount increases, so does the impact of delayed payments. You can imagine the cash crunch due to a delay in a $10,000 payment and a $70,000 payment.
This is where effective invoicing techniques can be beneficial. A shorter payment cycle, regular reminders, and extra charges for late payments can help get your invoicing on track, which can keep your cash flow smooth. A smooth cash flow is crucial for any small business undergoing expansion. Technology can play a pivotal role here as invoicing functions can be automated and tracked efficiently with the right software and app.
Similarly, ensuring timely payments to vendors and suppliers will help build a good credit history and strengthen supplier relations. The suppliers may give you priority over other clients due to your prompt payments.
A business consultant can help smooth the entire invoice and payment cycle, renegotiate favourable terms with vendors, and improve liquidity.
4. Debt Management
Small businesses often take on debt to expand, fulfill orders, or meet their working capital requirements. While the debt may seem manageable when the business is performing well, it becomes challenging when revenue is weak. A CFO is well-skilled to help you restructure debt by replacing it with lower-interest or longer repayment loans. Debt management also involves finding ways to monetize business assets to reduce debt, identifying opportunities to reduce costs, and finding cash flows to reduce debt.
A CFO can look at debt from a 360-degree view, prioritize capital allocation, and ensure that the debt burden does not hamper business growth. A CFO can work around the company’s weaknesses through strategic partnerships with companies that excel in those areas.
5. Reviewing and Innovating
Trends and customer preferences are dynamic. As a small business owner, you must stay on top of these changing preferences and ensure that your product or service adapts to them quickly. Thus, it is essential to review and analyze how your industry is evolving regularly and to innovate and reinvent yourself accordingly. While technology and your keen business sense are great to keep you going, an expert consultant’s network can give your small business that extra edge, that extra boost it needs to catapult into the big league.
A basic knowledge of business finance and learning while working has worked well for you till now. However, to reach the next level of growth, seeking the advice and guidance of someone familiar with this journey can save you a significant amount of money, time, effort, and headaches. Taking charge of your business finances need not be a one-person burden – sometimes, sharing the load is the better way forward.
Contact Edelkoort Smethurst CPAs LLP in Burlington to Help You Manage Business Finances
Talk to a fractional CFO about your financial challenges. You may be surprised at how the CFO can transform your business and unlock its growth potential. At Edelkoort Smethurst CPAs LLP, our business consultants and controllers can provide services such as financial planning and implementation. To learn more about how Edelkoort Smethurst CPAs LLP can provide you with the best CFO expertise, contact us online or by telephone at 905-517-2297.