If you’re like many small businesses, it’s hard to find time to step back and look at the numbers. There simply aren’t enough hours in the day and it’s only at year end you look at the books in any detail.
But having year-round visibility into your numbers and knowing what’s going on in your business financially is essential if you want to have a stable, secure company that’s ready to grow.
Here are five areas many small businesses forget about, and why you need to remember them.
Neglecting cash flow
The best measure of the health of your business is its profit margin, right? Well, it’s one of them. In many ways, profit is theoretical. It’s cash flow you need to worry about. Many small businesses struggle with a lack of cash, even when sales are increasing. Why? Because all-too-often, you don’t know about the cash that’s going out in the form of costs such as travel and expenses until it’s too late.
Not chasing late payments
Late payments are a big problem. In fact, they’re such a big problem that the UK government introduced the Duty to Report legislation to tackle it.
But you don’t have to hope legislation will do the job for you. Look at when your suppliers pay you. How many of them breach your terms? Once you have this information you can take decisions about how to tackle it. You can review your payment terms. You can start to be more disciplined about chasing payment when the payment date passes. Whatever you decide to do, you can plan your cash more effectively because you know when the payment is really coming in.
Assuming the data is correct
If you use spreadsheets for your financial data, it’s highly likely they contain mistakes. It’s easy to see how mistakes such as switching two numbers or getting the decimal point in the wrong place happen when you’re entering figures manually.
These errors can have big consequences: In 2017, Marks & Spencer initially reported sales growth of 1.3%. It then discovered an error in a spreadsheet. When that error was corrected, it discovered sales had actually fallen 0.4%.
By automating financial processes, not only do you remove time-consuming data entry, you also remove the mistakes.
Not reviewing your prices
When did you last review your prices? Supplier prices and raw material costs change all the time and you need to be sure they aren’t eating into your profit margins. Take time to review prices regularly and make sure you’re basing them on facts not gut feel or a general sense of what the market will stand.
Failing to be compliant
Not having visibility into your numbers also leaves you open to falling foul of HMRC. A survey found that one in five employees thinks it’s OK to exaggerate expense claims and nearly 90% of company car drivers admit to submitting an inaccurate claim in the past. By automating expense and mileage submission, you save employees time and make it much harder for "mistakes" to happen.
Knowledge is power
To paraphrase Benjamin Franklin, when you fail to prepare you prepare to fail. Many small businesses manage without having this visibility into their numbers. But when you do have the visibility you can spot problems much further ahead and take steps to solve them. It puts you in a position of strength when it comes to the financial health of your business.
Ready to learn more about improving cash flow, gaining visibility into company spending, and minimizing risk? Watch our on-demand webinar Travel, Expense, and Invoice Management Made Easy.