7 Tips to Successful Financial Management for Start-ups and Small Businesses
As an entrepreneur, your top priority is to bring in business and generate income. Your small team is stretched in all directions and you might not have a finance expert in your team. Is financial management too complicated? Something that you can simply outsource to an accounting service provider? Or an admin burden that you and your team take turns to do when required?
Entrepreneurs and small business owners do understand the importance of financial management and no one would like to run into risks of insolvency, loss of credibility over unpaid invoices, audit issues on bookkeeping and financial reporting.
So how can start-ups/small businesses with lean resources effectively manage their financials?
Here are 7 practical tips to manage your small business finance:
1. Understanding your financials
If you are not a finance/accounting person, take some time to acquire some basic accounting knowledge (invoicing, payment, profit & loss, balance sheet, cash flow). This need not be a daunting task. You can read up accounting guides, attend a short course, ask an accountant friend etc.
Alternatively, you can also invest in short term professional help to set up your finance operations and get the consultant to walk you through the various accounting processes and learn the best practices.
2. Leveraging on technology
Technology solutions for accounting are plentiful in the market ranging from heavy weight ERPs to standalone accounting software, cloud SaaS accounting services and even free software. Selecting a suitable accounting software can help keep your finances in order, provide valuable data for business decisions and performance measurement.
When deciding on the accounting software, start-ups/small businesses need to take into consideration their budget and current to medium term needs according to their business direction.
3. Sourcing for financial aid and tax benefits
Government across the world are coming up with various financial and tax incentives to encourage local business growth. Such incentives are a great help for start-ups/small businesses to stretch the dollar and develop certain capabilities they otherwise couldn’t afford.
Hence, you might want to keep track of your local government incentives and sign-up for the various news feeds to be aware of such help.
4. Use your financial data to do your business planning
You can be planning for an investment, developing a new product or expanding your operations overseas. A good financial analysis can help you decide on the right budget, disbursement frequency and projected outcome.
A key point to note here is good financial analysis requires good data. Hence, your finance operations would need to keep reliable quality data for business analysis.
5. Manage your cash flow and projections
Cash flow is especially critical to small businesses with smaller working capital. Mismanagement of cash flow can lead to insolvency.
Hence, it is important to closely monitor key cash flow indicators like timing of large cash payment, credit terms to customers, receivables aging, obligations to business loans and equity investors.
6. Performance measurement
Continuous monitoring of performance is crucial to any business. It helps you keep track of how well each of your products/services are performing and the cost related.
From this information, you can make business decision like expanding on a certain profitable product offerings or closing the unprofitable ones. You can chart your past performance and set sales goals ahead.
7. Engaging professional help
With the many priorities to balance, engaging short term professional services do help. This is especially beneficial when you are starting up the finance operations and want to get things right on the start.
Research on your local consultants, their expertise and fees to decide on the right one. You can definitely find the right one that fits your budget.