As a small business, you are the elite. The intrepid explorers who look at an opportunity and say….” Yeah, sure, I’ll go for that.” Tenacity and ambition are the hallmarks of the small business owner and are the skills that often set them apart from their contemporaries in big business. Unfortunately, being a small business is like playing the game in hard mode. You suffer challenges others don’t by virtue of your existence, which can prove fatal to your business. To help you overcome and thrive, we have compiled a list of some of the foremost issues small businesses face today and ways to keep yourself in the game.
No matter your experience, no matter your size, and no matter your industry, cash flow is the make or break for business. Failure to properly monitor or understand your cash flow is almost certain doom for your small business.
Cash flow is the amount of money flowing in and out of your business. You can only be sure of your business’s financial health by correctly recording cash flow using a tool like a cash flow statement. If you want to learn more about the specific functions of the cash flow statement and how they are built out, consider checking out our blog on the subject.
Let’s be honest, the ultimate goal of a business is to have more money coming in than out, but a crucial mistake many small business owners make is not considering upcoming transactions. Many business owners make the mistake of only assuming what the number in the bank is right now instead of what the number will be next month after all overhead is paid. That result is the true financial health you want to monitor.
While there are many ways to improve your cash flow, we recommend a cash flow transfusion. This is also called bank robbery. If you are looking for a legal way to improve cash flow, here are a few ideas:
Cash Flow Improvement Ideas:
- Improve your accounts receivable process. Outstanding invoices leave money on the table. The problem with people is you can’t predict them. Or can you? By providing a discount or benefit for those who pay early, by a specific date, you can more accurately predict behavior and start reaping the cash they owe you before you break up some knees.
- Inventory improvement. Put those interns to work and take stock of your inventory regularly. Keeping an up-to-date inventory means spending less on supplies you already have and don’t need, and you can track which of your products just aren’t moving as you hoped. By clearing up space in your inventory of slow products, you can move your better-selling products in at greater volume.
- Outsource your business functions. Not all of them, mind you. Things like graphic design, copywriting, IT, accounting services, payroll, and more can be outsourced to third parties and firms. This can reduce your overhead by reducing the living, breathing humans you hire.
- Increase prices. Seriously! Are you being competitive in your market? Are you selling your wares and services for what they are worth? It’s natural for prices to change, so don’t be afraid of adjusting them when appropriate.
- Make a weekly cash forecast. Keeping on top of your cash flow is vital, so do it often. There’s no reason to wait until the end of a month or quarter to figure out where your money is! If you keep a running cash flow forecast each week, then a surprise charge won’t be nearly as dangerous.
Failure to Use a Budget
This one seems obvious, but it is remarkable how so few small businesses fail to use a budget. If you use a budget, keep it up, and well done.
Many companies use budgeting software to ease the burden of tracking everything, but regardless of how you do it, building a budget of all your expenses, how much you should be spending, and where your funds need to go is a vital step that will keep you money-savvy and conscious of how you are managing your funds.
A reasonable budget will flow and evolve with your company. They should be considered regularly to see if it needs an update.
Paperwork! It’s the worst! Does anyone actually like doing paperwork? The problem with paperwork is the joke itself. Because the task is repetitive and easy to mishandle, many small businesses fail to manage it well.. With the internet being a crucial part of business, it’s fitting that technology can solve the paperwork nightmare.
Using software, filling out forms, filing them, recovering them, sending them out, and all the other tedious tasks become quick, easy, and efficient.
Unfortunately, many small businesses also fail to use technology to its full potential, which can lead to many problems, but that’s a blog for another day. We’ll see how Tuesday goes.
Paperwork is never going away, and there will always be forms to file and reports to make, and if you can do that without fancy technology, good for you! But if you hate everything about it, we recommend using a cloud-based financial solution software to help you and mark one thing off the stress list.
Not just to you, but from you to others! Depending on who you ask, anywhere from half to more than half of all businesses have no automatic billing set up. This can mean that during your
busy week, the rent or utilities bill just goes by the wayside and the people you owe money to want their money. This sounds like another obvious one. Just pay up! Pay the bill! Unfortunately, it is less about maliciousness and a lot more about negligence. Failing to pay your end of the agreement can quickly find you on the wrong side of a landlord or a collector’s call list. They are not good places to be.
The other downside of not paying on time goes back to proper budgeting. If you fail to pay your bill, you may perceive you have more money than you do and spend it even though it needs to be used for payment, digging a debt hole—also not a good place to be.
Automatic billing is the easy way to fix this problem, and you can use many different financial solutions software options to ensure everything goes as it is supposed to.
Conclusion: Use a financial solution software
If you are a small business owner, this is just the tip of the iceberg regarding difficulty. We could go on, but for these significant issues, a solid fix is just grabbing a financial solutions software.
At Xledger, we provide practical, real-world solutions for your financial problems, including everything mentioned in this blog. Are you feeling the pain from outgrowing your current financial software? Let our expert team of customer service specialists give you the insight you need for leveling up the way you do finances.