Most of us take time to give our homes a spring clean, but if you’ve been run off your feet your business finances may also need a tidy up.
From reviewing suppliers to managing cash flow and revising business plans, every small business owner can benefit from a financial refresh. Not only can looking at your business finances help you save money, if you set things up right it can also help save you time in the future. Here are a few handy tips to help you get started.
1. Write your business plan
A good business plan can help with decision-making and to identify current or future obstacles so you can better anticipate and avoid potential risks. If you don’t have a business plan, set aside some time to draft one up. If you have one already, review it regularly and consider any updates that may better reflect your current business needs and goals.
2. Review your projections
Prepare annual, quarterly and monthly cash flow projections and closely monitor your operating expenses, overheads, stock levels, debt collections and profit. If you'd like some professional help, an accountant can help review your cash flow and plan for any potential shortfalls. Get started with the CommBank financial plan template, which has a cash flow spreadsheet.
3. Tighten your payments
Receiving payments faster is one of the quickest ways to boost your cash flow. Prepare an accounts receivable table to develop a clear picture of money owed to you. From this you’ll be able to see what percentage of your customers are taking too long to pay. Once you know, use this information to pursue unpaid debts quickly.
If you find this is an ongoing problem, you may need to change your payment policies or think about stopping work with customers who regularly pay late. A mobile EFTPOS device means you can get paid anywhere at any time, saving you the hassle of chasing up invoices.
4. Go over your pricing
Pricing is one of the most difficult areas of a business to get right and one of the most important for maintaining a positive cash flow. As a small business owner you may find yourself giving one-off discounts and deals that can undermine your pricing strategy. Market conditions may also change, making your prices too high or low. Assess your pricing by comparing your offerings to your competitors.
See our guide to getting your pricing right.
5. Check your inventory
Schedule in regular inventory reviews so you’re only holding as much stock as is required to run your business efficiently. Excess stock can tie up cash and increase storage and insurance costs.
6. Review your contracts
Equipment leases, professional service contracts and business loans represent an opportunity to negotiate savings. Having a contract in place doesn’t mean you can’t try get a better deal. Renewing early, making payment readjustments, requesting a lower interest rate or refinancing are some requests that may help you save money.
One of our business banking specialists can help you review these options.
7. Separate your tax
Setting up a separate business account where you set aside amounts towards your tax estimate can help you stay on top of your tax throughout the year. And keeping business and personal accounts separate makes it easier to maintain accurate records of your business income and expenses to help you prepare for tax-time.
8. Go paperless
Opt to go paperless wherever possible. Most accounts offer digital billing options and this can help keep you organised as well as cut administration costs. Tax record originals should be saved for five years, but other important documents can be scanned and stored somewhere secure for ease of access.