Our lives are inextricably tied to time – and this is why the start of the financial year is the perfect time to introduce new initiatives! You will find your mind – and your staff – are more accepting of new measures at these inflexion points.
Obviously, your business is made up of many parts, including sales, production or service delivery, marketing, financial control etc. However, let’s just focus on five, simple business finance tips that can make a real difference to your profits.
Remember: a percentage change in the right part of your business can result in a tenfold improvement to your profits.
You can trade profitably and still go bust if you can’t get people to pay you. Focus on finishing work and getting it delivered. Once completed, invoice immediately. If you are close to the end of a month and you are nearing job completion, ask your client if you can invoice in advance. The customer doesn’t have to pay until they are satisfied. The other end of the pipeline is chasing slow payers.
If you are a small business and personally very busy, make sure you review your Aged Receivables report at least once a month. When do reminders go out? How stern is the reminder? If someone has a poor credit history, do you allow this to continue or do you need to speak to them in person? At what stage do you bring in a professional debt collection agency? Understanding key drivers of simple business finance can greatly improve your cash flow.
- Understand what drives your business and build on it:
What are the few key drivers of success in your business? Perhaps it is rostering to make sure that staff levels are in line with revenue. Is it minimising churn? The size of each sale, or perhaps the yield? Know what truly affects profits and make sure you allocate a good amount of time to ensuring this area is working well.
- Eliminate failures and roadblocks
Do you have a product or service that is limping along? Unless you are investing in it to be a major profit centre in the future, it’s time to let it go. It’s draining resources that could be spent on your stars. The exception to this would be if it is a major source of cash flow. Once you have jettisoned a lacklustre service or product, it’s incredible how liberating it is for your business and your employees. The same applies to your business ‘partners’ or suppliers. Is your accountant proactive in advising you on the best structure to minimise your tax exposure? Is your bank gouging you? Or can you simply get a much better deal on your photocopier or IT service agreement?
- Technology Is your friend:
New and better ways of completing tasks are emerging at a rapid rate. Keep your eyes open to opportunity. Is there new software that can reduce a project cycle time by 25%? A major clue to this type of software or equipment is the level of automation. If you see something that auto-completes tasks, investigate further. A job that took your accounts team four hours might be reduced to two minutes. Then they can focus more time on chasing slow payers, or be analysing sales data to identify threats, prospects or business funding opportunities.
- Be prepared to invest in growth:
Seeking out and seizing opportunities is the lifeblood of long-term success. While your competitors are complaining about the economy, you should be looking forward, getting your financial house in order so that you can strike quickly and get a first mover advantage. That might mean employing more staff, so you need to consider if there are government grants or business funding available to reduce your costs. It might mean buying or leasing new equipment to improve productivity, which means you need to have your finances up to date to demonstrate to a potential lender that you are a good risk.
It’s up to you to make it a “Happy New Financial Year” … and there’s no better time to start than now.
Speak to Capify today to learn how a small business loan can fuel growth by providing easy access to funds this financial year. One of Australia’s highest rated business loan specialists, Capify can assist you with simple business finance.