Maybe business seems pretty good to you: Jobs are getting done, new customers are dribbling in, cash flow is positive. But are you growing? Or are you just treading water instead of really getting ahead?
Lots of little things can have a negative effect on small business revenues, even if they seem like small potatoes. It’s possible that if you made improvements in just a few areas, you could have a major impact on cash flow and business growth.
Here are six things that you can start doing right now that could dramatically change your business finances.
For entrepreneurs who started their company at the kitchen table, it can come as a bit of a shock to realize that every dime that goes towards your business may not be significantly beneficial to the business. Small business owners need to be savvy about how they spend money.
Take a look at where you are spending and what you are getting for your money. For instance, advertising is often one way that small businesses waste cash. Effective marketing needn’t be super expensive, but it does need to be highly targeted. Look for marketers who are sensitive to the needs of a small business and who understand your industry.
Rein in discretionary spending whenever possible and analyze the spending mistakes you’ve made in the past. Do you need the very best computers or printers? How expensive does your furniture or equipment really need to be? Figure out your company wants versus what it needs.
Separate personal and business expenses
Your bookkeeper or account will thank you for this. Not only does it make things cleaner at tax time to have separate accounts and credit cards for both sides of your life, but it’s safer for you financially in the long run. Don’t secure business finances with personal funds. It might seem like a smart solution now, but it will likely create a mess to clean up later.
Educate your customers
Small business owners often forget to formalize payment guidelines, especially if you’ve had informal handshake relationships in the past. Invoices should clearly show payment terms — and those terms don’t have to be Net 30.
The faster you invoice, the sooner your payments show up. Simple. Online invoicing can help to facilitate the process. But whatever you do, develop a strategy for tracking payments.
Make sure you also establish firm guidelines regarding nonpayment. Delinquencies can put a serious dent into cash flow and may even put your business into jeopardy. So, don’t avoid a delinquent customer and let it slide simply because it will be uncomfortable to confront them. Follow up with friendly written reminders and phone calls to let them know you are still waiting for that payment.
Perform credit checks
If you’re extending credit to new customers, take a better look at how you’re vetting them. Get references, but don’t stop there. Take a deep dive into a prospective customer’s payment history and background.
To get a real look at your customers’ creditworthiness, ask them to agree to a credit check. Credit reports give you insight into payment history and any delinquencies, which makes it easier for you to manage your money and your business.
Delegate or outsource when it’s appropriate
While entrepreneurs are, by nature, people who think they can do anything that needs to get done, the best business people can also spot inefficiency when it happens. Knowing when to hire help — either outsourced or internal — is a sign of a smart leader. How do you know when it’s time to look for help? Ask yourself these questions:
· Are you spending time on tasks that are taking you away from growing your business or generating revenue?
· Are you tackling tasks that are really not in your wheelhouse just because they “have to get done”?
· Is there the potential that you are doing more harm than good? (Are you handling at bookkeeping, payroll and taxes correctly?)
Technology can’t solve all your problems. But it’s not just for large corporations anymore, and it can be a useful tool to create efficiencies and organization in many areas of your small business.
Are your employees in the field still giving estimates on paper? Are they able to take a credit card payment on the spot? Are you using cloud accounting to track expenses, handle payroll, manage the books?
Technology doesn’t work by itself. But things like credit card payments on the spot can improve cash flow, enhance customer service, and the data collected at job sites can help you plan for the future. The right accounting software can keep your financial data organized so that your books are clean and you have good insight into cash flow.
At BKE, we know small-business bookkeeping inside and out. We use a blend of technology and personal relationships to ensure that you have clean, accurate books to run your business. And we’ll take a look at your books free of charge to let you know what solutions are best for you. Get in touch today.