As some countries ring in the new financial year, now is the time to reflect and make New Year’s resolutions for your SME for the financial year ahead. We have the top three resolutions that SME owners and executives need to consider that may really impact their SME’s bottom line and its growth.
Improve Cashflow Management
In a recent study, a major concern that was raised for SME owners was cashflow. Therefore, an important resolution is to improve cashflow management. The beginning of a new year can be concerning for small businesses due to the annual seasonal post-Christmas cashflow dip. It is foreseeable for businesses to find it extremely difficult to meet their outstanding costs on time, which creates issues for even strong and viable businesses when it comes to their end of February business activity payment statements. While many small businesses often focus on their exciting new business ideas and trying to bring them to fruition, it may mean that prioritising time on less exciting notions such as systems improvement is compromised. The beginning of the year is a great opportunity to undergo a financial housekeeping check and to put better solutions and systems in place. For example, try improving invoicing processes, to mitigate against potential disputes and improve on late payment rates. A small amount of work now in these areas may create incremental improvements that can expedite the collection cycle and therefore increasing cashflow within your SME.
Find Better Capital Options
There is a staggering low percentage of small businesses who review their primary bank relationship or actively keep an eye out for credit facilities that fit their business needs. The beginning of the year is yet another opportunity to consider what working capital options are a better fit to your business, to enable growth. In the case concerning owners of high growth businesses who do not necessarily want to use their own capital funding, an option could be debtor finance, a funding solution that grows in line with business revenue. Debtor finance is more helpful to high labour businesses where wages must be met, often before when the business is actually paid. Growing businesses can struggle with cashflow due to taking on more employees and/or ordering more stock, yet while having to wait 1-2 months to receive payment. Debtor finance enables a business to access funds straight away, without having to wait for their invoices to be paid.
Achieve a Healthy Work/Life Balance
A recent study also found that almost 90 percent of SME owners put in over 50 hours a week in to their business, and that same study found almost half were actually putting in 60 – 80 hours per week. Long hours go into running a business especially a new and growing one. Moreover, the nature of the digital space means that business owners are always accessible. It really is worth making time for a mental health check and therefore encouraging resolutions that work on an individual level to help SME owners achieve a more fruitful work/life balance. Consider taking time off to refresh for the year ahead, but also create a weekly calendar for non-work meetings and activities that help keep you refreshed also. That way as a SME owner, you have more energy and your time that you do spend in your business is the best time you can offer.
Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.