The small business world is dog eat dog and being financially savvy is crucial. Here are 4 simple finance tips for small businesses.
The Ins and Outs
It is crucial that you monitor your cash flow on a regular basis. Ensure that you send out invoices as soon as a client receives your goods or services and make sure you follow up any unpaid invoices with an email or letter. Too much cash tied up in unpaid invoices can lead to cash flow problems, a leading cause of business failure.
If you have customers frequently late at paying their bills and do not respond to your written communications, consider offering an incentive such as a percentage discount taken off the bill if they pay within a specific time frame.
Keep track of all your small business expenses, which can add up quickly. Note where your money goes and identify where you could make some money-saving tweaks. The right software package can help you keep track of your accounts. If you are strapped for time, consider hiring a private accountant who will do this for you. You can also purchase UK payroll software such as Sage and Quickbooks, which will assist you with PAYE, pensions, tax deductions, and HMRC compliance.
Don’t Run Before You Can Walk
Having sufficient capital is essential to ensure you have enough funds to get you through the start-up phase and up to three months beyond. Save a pot of money to cover your living expenses and your company’s outgoings for the first few months until you establish a steady income.
Don’t go crazy, spending lots of money on business cards, signage, and advertising before you have the income to cover it. Smart and steady is the best way to grow.
Save, Save, Save
To save unnecessary expense, only buy essential equipment. Technology that increases efficiency by cutting down your service or production time is necessary. Using computers with useful communication apps or programs will ramp up workflow because everyone will be on the same page. You can save money by creating digital files and invoices. Using technology can forego the need to buy paper, ink, postage supplies, etc. You will not need such large premises because you will not need room for storage shelves and filing cabinets for the paperwork.
Buy low priced second-hand equipment such as refurbished computers, phones, and office furniture. Think about relocating to a smaller, less expensive building. If you don’t need to be in a busy city where overheads are high, move somewhere more cost-effective.
The Price is Right
The success of your business depends wholly on how well your service or product sells. A major contributing factor to this is how much you charge. Pricing your goods or services is not an easy task, but it is vital that you get it right. Under-pricing your products will leave you with a cash flow problem and make you feel resentful because you are working too hard for too little. Over-pricing will limit your sales and cause your business to collapse. Be confident in your product, but not arrogant.