It’s not easy to take a small business from idea to profit. Our Director of Finance, Kym, is lending her financial expertise to help ensure your business runs smoothly and successfully.
Set a budget, but be flexible – Budgets are important tools for operating a financially successful business. When developing your budget include key staff to feed into appropriate sections: your HR manager can let you know how benefit claims are trending,your sales team can provide revenue forecasts, and your IT manager can recommend technology investments.
Even with all this input, you don’t have a crystal ball. Budgets are set and then things change. Constantly tracking against your budget is key to spotting issues early and then adapting. If you are tracking over on an expense, are there cost savings elsewhere? Can you scale back on that expense item in the next quarter? Are you exceeding your sales revenue targets? Is it consistent enough to warrant adding more staff or is it just a blip? Has everything changed substantially? (Hello March 2020!) Maybe a budget overhaul is in order.
When budgeting, don’t just think about the upcoming fiscal year. Think ahead and createa high-level, multi-year budget. This is particularly important if you are planning for growth, have large investments on the horizon, or are moving into new markets or service offerings.
I love budgets, but of course I’m biased.
Have a rainy-day fund – If the last two years have taught us anything, it’s that things change quickly. That 2020 plan – tossed out the window! A resilient business has planned ahead for the unexpected and set up a rainy day (or pandemic) fund.
Look at your cashflow and determine how much money it takes to run your business each month. Most experts recommend having three to six months of average expenditures on hand, but of course every business is unique and has different needs. Doing a deep dive into your cashflow will help you determine the right amount for your company. Be sure to consider things like if your revenue is cyclical, upcoming large investments, and growth projections. Each will have a different impact on how much you should set aside.
Don’t forget to make sure that your rain-day fund is kept separate from your everyday operating cash!
Develop a good billing strategy – There are clients who pay their bills on time and those who don’t – it’s a fact of life in the business world. Knowing who falls into which category helps to form a good billing strategy. If you have a slow paying client and a big expense heavy project coming up for them, bill in advance if you can and as early as possible. If you’re working with a new client, negotiate a deposit. Adopt individual strategies depending on the client. A one size fits all approach doesn’t work here.
All invoices should be descriptive and accurate. Not only does this help ensure invoices are processed in a timely fashion, but it also shows your client that you have respect for their time and money.
Provide context – My whole job entails getting my colleagues to do things for me. Do your timesheets, submit vendor invoices, open POs, bill the clients, check your budgets, and more! Taking the time to explain why each is important to the business’ success (and their own success), motivates people to do these less than glamourous administrative tasks.
A keen eye, always – Never take your eye off the ball. Don’t get comfortable. Keep a keen eye on the finances of your business. Check those budgets, follow-up on outstanding invoices, understand your cashflow and be ready to adapt.
Kym Lightowlers is the Director of Finance at APEX PR.
Ready to take your small business to the next level? Send us an email at firstname.lastname@example.org to find out how we can help!
NEXT: The Pivot – Drew Neisser