10 Financial Management Tips for Small Business Owners

10 Financial Management Tips for Small Business Owners

Very few small businesses are set up by owners or entrepreneurs who are financial or accountancy professionals by training. But no matter what your own area of expertise may be, it makes real sense to focus on the financial side of your business as much as you concentrate on manufacturing or distribution, for example. Whether it’s downloading some simple business apps or investing in accounting packages, there’s a lot that you can do to get on top of your corporate finances.

business apps

  1. Invoice early and often. Time and again, we hear of small companies who believe that they should invoice at a certain time or times each month, e.g. mid-month and end-of-month. But this could be costing you a lot of money each year. The simple truth is that as soon as you’ve delivered goods or provided a service, you’re fully entitled to send off an invoice.Most clients will pay you within a set number of days from receiving your invoice, so every day counts when it comes to issuing them. And remember that you can’t go chasing payment until that minimum payment term is up, so the quicker your invoices are in the post, the better.And even better, if your clients will accept electronic invoicing, go this route as it will save an extra day or two on postal delivery. It will have a huge impact on your cashflow, and means that you’re less likely to dip into working capital to finance extra debtor days.
  2. Credit management is best sorted at the outset. Very often, we’re so desperate to make a sale that we’re afraid to raise the subject of payment terms. This is a big mistake. If you let things slip from the outset, it’s much harder to get clients into a routine of prompt payment.Most clients will accept that you can’t afford to bankroll them by providing lengthy payment terms, and if they don’t, do you really want them as clients? Also, if there are particular strains on your cashflow, do the sums on what it would cost you to offer a 2.5% discount for early or immediate payment.
  3. Be super-aggressive about your stock control. If your business demands that you keep stock in hand, every single item of stock is costing you money until such time as you’ve been paid for it.Be ruthlessly focused on carrying minimal amounts of stock, and opt for suppliers who can re-stock you quickly in the event of a sudden ‘run’ on any particular line. If you have a shop window or a shop floor which requires display of stock, clever and impactful displays can leave you needing less stock than a large, random display.
  4. Never mix business and personal expenditure. It can be tempting, at times, to dip into your business account for personal expenditure when your own account is under strain. But trust us, it’s a really bad habit to get into. It makes even the most basic bookkeeping a nightmare when you have to pore through both business accounts and personal accounts to identify what was charged to the business. And in similar fashion, never lodge a business cheque to your personal account, as it can easily be overlooked – till it crops up at a Revenue audit! And if you do experience trouble keeping track of your personal expenses, maybe consider one of the excellent business apps on the market.
  5. As soon as you can, invest in an accounting package. Even if your business is only at the fledgling stage, it will profit hugely from purchasing one of the many reputable accounting packages on the market. And with software such as Sage 50c, you can recoup your outlay very quickly in the form of reduced manhours to do simple accounts functions like invoicing, issuing statements, reconciling payments etc. Also, you usually have the option to pay on a ‘per user’ basis, so the cost won’t grow until your business does!
  6. Offer multiple electronic payment options. It makes sense that the more ways to pay you offer, the easier it is to get paid. This can be anything from accepting payment through a service like PayPal to accepting credit or debit card payments. If it makes things easier for the client to pay, chances are that your cashflow will get a real boost – for very little outlay.
  7. Be systematic about your finances. Whether you’re ready to invest in accounting software or are still operating on a manual basis, the more organised you are, the better. Make sure that your systems and processes are fit for purpose, and if you’re not sure, any reputable accountant should be able to help you set up the processes that will keep your financial management as streamlined as possible.
  8. Don’t be shy about networking. No matter what line of business you’re in, chances are that there’s an organisation (whether formal or informal) that represents your industry. Or maybe you could join your local Chamber of Commerce or networking group. This lets you talk to people who’ve faced exactly the same challenges as you’re facing right now, and are probably full of useful information on how to proceed. After all, why make the same mistakes as your peers?
  9. Harness the power of Business Apps. If you’re not yet ready to shell out money on accounting packages, you can put your toe in the water by purchasing low-cost or no-cost Business Apps. You’ll find apps to tackle anything from tracking your daily expenses to logging hours spend working for a particular client. They can add a huge boost to your productivity, and make client billing or expenses reconciliation so much easier – and so much quicker.
  10. Be aware of the impact of PAYE Modernisation. You’re probably aware by now that PAYE Modernisation comes into effect on January 1st 2019. This major reform of our PAYE system will have a number of unforeseen impacts for small businesses. For example, in the past, companies were able to use their P30 as a form of cash flow mechanism. For example, they would be due to pay €3k for PAYE, and €2k for PRSI. However, when submitting their P30, they might just declare €2k for PAYE and €1k for PRSI and therefore not pay in full what was due – but reconcile a payment during the end of year process of P35. This option is now gone.

The bottom line is that you’re not really managing your business until you’re managing your finances, so the sooner you get on top of them, the better. Also, bear in mind that as your business grows, the challenges of financial management will grow accordingly, so the sooner you get to grips with your finances the better.

And even if you have zero experience in the area of finance, hopefully the ten tips above will convince you that there are lots of practical steps you can take that will let you manage your finances like a boss.