Financial stability is crucial for every business, particularly for up and coming small to medium businesses (SMEs). Having your own solid financial understanding is essential to make sure that you are managing your company well. You can ask experts for help, but having sufficient knowledge of your own is important for any business to prosper in the long run. Here we’ve covered the six key finance tips to help your SME become successful:
Tip #1: Understand Your Financial Position
Know your profit figures, revenue numbers, the details of your cash flow statement, and more. If you don’t understand them yet, now is the time to start filling your knowledge gap. It is necessary to know what they mean and what role they play in your business.
“Making sure your financial accounts are up to date now saves time later when applying for funding.”
You need to acknowledge your financial position to create better business decisions and look for ways to improve your operations. Becoming involved with your finances may help highlight opportunities to increase your cash flow, which is vital to keep your operations going. It’s also essential to make sure that your financial accounts are up to date to save time when applying for external funding for your SME.
Tip #2: Create a Clear Business Model and Growth Strategy
A defined business model is essential whether you are a startup or entering the new market. It helps you assess new opportunities, taking calculated risks, and keeps you focused on the future growth of your SME. It also lets your potential partners, investors, suppliers and customers understand easily whether your business is the right fit for them.
Tip #3: Identify Problems and Take Meaningful Action
Look into your business and see the problems you can solve to improve your financial situation. There’s no point sweeping issues under the rug!
- What costs are essential to your business operations?
- Do you have any unnecessary costs that you can cut?
- Can you negotiate payments with suppliers?
- Can you reorganise your payments for more considerable expenses?
Asking these questions may help you remove what you don’t need in your business. It also helps to identify the problems that can halt your SMEs success quickly. What really matters is that you do something about it.
Tip #4: Set a Budget
A well-planned budget is necessary to manage your spending. It serves as a guide to you to create certain business decisions ahead of time. Having a budget also gives you more opportunities and visibility to plan for your SMEs expansion.
These are some things you can plan so you can create a budget that will help you achieve your goals:
- Keep tabs of all the money that goes in and out of your business to keep a healthy financial state.
- Estimate your revenue, plan expenses, and limit spending outside of the plan.
- Predict your cash flow and capital investments throughout the period.
- Allocate funds to operations that support your objectives.
Things don’t always go according to your plan, even when you have a budget. To keep your SME safe during unexpected situations, you need to monitor your business’ performance in a timely manner, so you’re ready to make adjustments when needed.
Tip #5: Set Up Sufficient Access to Funding
Every business needs sufficient working capital to keep the operation going, invest, and help with your SMEs future growth. Some effective financing options you can use for your business include business loans, business credit cards, crowdfunding, or debtor finance, which allows you to generate working capital from your outstanding, unpaid invoices.
“Debtor finance providers will pay you up to 90% of your verified outstanding invoice value upfront.”
Debtor finance is an increasingly popular option for SMEs looking to leverage their accounts receivable ledger to access cash sooner. Instead of waiting up to 60 days for customers to pay your invoices, your business can access the money almost immediately.
Debtor finance providers will pay you up to 90% of your verified outstanding invoice value upfront. A debtor finance facility acts as a revolving credit line backed by the invoices you issue to your customers. You can choose to draw down funds as often or as little as you like, only paying for what you use. Your business can use this cash instantly to pay your bills, secure new supplies or invest in growth opportunities.
Tip #6: Stay On Top of Your Taxes
Having any form of tax arrears or issues pending with the ATO is a red flag for any business. When it comes to seeing the necessary business finance, you’ll need to support and grow your business; lenders will certainly check out your tax obligations. This means submitting your BAS on time, every time, paying debts when they fall due, and communicating with the ATO when something isn’t right, or you think you will fall behind. You can even negotiate a tax payment plan to help you get back on track.
If you’re struggling to keep on top of your tax obligations, consider a professional. Accountants are there to solve your headaches, and the ATO will even give them additional time to complete your quarterly submissions, often meaning more money in your pocket for longer!
Running a successful SME takes a lot of time and effort. Finance should support your business, not detract from it. Implement these tips to help your business over the long term. There are also many options for businesses today when it comes to alternative financing.
Explore the best financing option for you with TIM Finance and unlock tomorrow’s cash today!