The words “financial management” alone can cause tension for many small business owners. It’s often viewed as time-consuming and complicated. Unfortunately, this usually means it’s neglected, too.
Many entrepreneurs and SME’s (small to medium enterprises) keep their focus solely on profit and growth. But financial management involves far more than this. Financial management of your business can and should consist of monitoring and adapting cash flow procedures, understanding legislation that affects your business and transactions, and consistently evaluating goals and progress.
While it can seem overwhelming at first, strategic and well-organised financial management will help your business in the long run.
Here are five ways you can improve your small business financial management this month.
Read-up on current affairs relating to your financial management
Making sure you are up-to-date with industry and wider news is one of the simplest ways to improve your small business financial management. Current affairs can have a drastic effect on many aspects of your business and its finances. We have all seen the ongoing impact of Covid-19 and of Brexit, for two vivid recent examples.
The world is constantly evolving and changing, and it is crucial you stay on top of what changes are affecting your business. Specifically, you’ll want to be on top of any new government regulations, the latest anti-money laundering guidance and any recent business tax changes.
If you deal with international clients or payments, you will want to keep on top of foreign matters, including global economies, the latest exchange rates and any political changes that could affect your transactions.
Current affairs can change rapidly, so the next time you are on your daily commute or sipping your morning coffee, take the time to read up on the latest business and financial news.
Conduct a Covid-19 business review
As vaccines are rolled out, and economies begin to reopen, life is changing once again for businesses. This is the perfect time to reassess three things: how your business has adapted during the pandemic, what changes have been successful and those less so, and what will be important going forward.
When the first lockdowns were introduced in countries across the world, businesses had to adapt quickly and under severe time pressures. Your business may have implemented working from home, dealt with furlough payments, or reassessed your financial goals.
Whatever adaptations you made, you now need to choose what is staying and what is leaving. If working from home has been successful for your business, you may want to consider the possibility of getting rid of expensive office space.
On the other hand, if working from home has not been viable or you have found it has not been productive for your business, you should consider the steps needed for reintroducing staff to the office and ensuring covid procedures are in place.
Face-to-face meetings will also increase as restrictions ease. Meeting rooms will need to be planned with cleaning processes, social distancing, and ventilation in mind, and you may want to consider looking at issuing business bank cards for employees as external events are scheduled. PayPugs offer business bank cards amongst many more services for small businesses.
Planning and reviewing your business, its adaptability, and how it has changed over the past year will save you money in the long run. Reducing office space, creating a safe and productive environment for your employees to work in and organising for the reintroduction of face-to-face meetings should all be part of your Covid-19 small business financial planning.
Fine-tune your financial management procedures
According to a study from Intuit Quickbooks in 2020, 1 in 7 small businesses have reported being unable to pay their employees’ salaries due to cashflow issues, amounting to 2.2 million people in the UK not being paid when they should have been. In another study from the UK government, it was reported that 24% of businesses feel late payments are a threat to their survival.
Both of these studies show the problem that cash flow errors can cause from start to finish. To avoid this, you want to ensure you have optimal cash flow procedures in place. Take time out from your busy workday to review your processes.
Ensure you have clear payment terms, a robust invoicing strategy, and that late payments are chased. Beyond managing your income procedures, you must also monitor your internal financial processes.
Review your payroll system, your income and outgoing balances and your strategies for handling taxes.
Diarise regular reassessing of your financial goals
One of the strongest aspects of your small business financial management will be goal setting. As the financial year progresses, you should revisit your goals to make sure you are on track. Profits are part of this.
But you also want to investigate which assets are generating these profits, any areas of the business you can potentially streamline and how your cash flow is performing, all in the context of your performance towards your business goals.
Goals can be adapted as needed, or you can restructure your approach towards a particular goal, depending on performance. A lot can happen between setting a goal and achieving it, and adapting to ensure goals are met will only be successful if regular goal reviews are scheduled.
Switch to a bank designed to help your small business with its financial management
High street banks may be your first go-to for managing your business finances, but they are not always the ideal option. Traditional banks will often take a one-size-fits-all approach towards business banking, treating customers with a tick-box attitude and ultimately not providing the best service.
By choosing a dedicated and modern bank such as PayPugs, you can streamline and improve the financial management of your business. We approach banking from a BaaS perspective – Banking as a Service – and our expert team can handle transactions and invoices on your behalf, including navigating international markets.
We can help you understand risk and compliance, and we pride ourselves on providing a personalised customer service experience.
Rather than being directed to call centres and treated like a number on a sheet of paper, we care about you and your business.
To find out how PayPugs can help you, get in touch with our advisors today.