As there are many differing schools of thought on optimising cash flow, there is a consensus around keeping matters simple and being thorough as you execute the basics. Remembering profit equals revenue, minus expenses, may seem reductive to some however, exploring in detail how your business earns money, bills clients, and plans for taxes will help navigate the more turbulent times and capitalise on the peak seasons.
Plan for taxes
Understanding tax obligations and deadlines can hinder both first-time business owners and also established entrepreneurs. Perhaps more common for former, the main takeaway is all SMEs should try and avoid any unwanted surprises as the end of the financial year approaches. A recent Forbes article cites “Planning for taxes’ ‘ as pertinent tip from the Young Entrepreneur Council.
— Young Entrepreneur Council (@YEC) March 26, 2021
Not only does this require shrewd bookkeeping but approaching tax with optimism and leveraging its concessions to help maintain a steady cash flow for your business. This can range from registering your business as a Proprietary Limited Company to appropriately timing your investment in assets and the hiring of employees. Seeking expert advice from a Chartered Accountant will also go along to safeguard any unexpected tax burdens when the workload increases. Grow Finance has readily accessible Invoice Financing for SMEs who need to continue their operations unfettered and employ a specialist to overlook their tax matters.
Establish what is working and what isn’t.
Critical analysis of your business on a regular basis will help you better understand what’s working and what’s not. For instance, Gate City Banks’ CEO Chris Lee reiterated the need for business introspection to the Grand Forks Herald “Are there areas of your business, where there is currently no demand, that need to be rethought or restructured?”. Being open to change will help SMEs adapt when the market experiences a downturn as seen recently with Coronavirus and restructuring the business to offer new services will help you capitalise on new opportunities and in-turn stabilise cash flow. To compete with the established players, SMEs are encouraged to obtain the correct technology and equipment to optimise their new market potential.
“Asset Financing from Grow Finance will allow, within hours, the investment and upgrade of all assets ranging from energy supply to new machinery et al as Grow Finance is a certified and reputable non-bank lender ready to assist at a moment’s notice.”
Offer clients fixed rate payment packages
For many, asking for payment is deemed harder than setting up the actual business but at the end of the day, it’s your livelihood. SMEs and entrepreneurs alike, especially in the formative stages of the business, can offer monthly payment packages to clients that are predictable and workable at both ends of the transaction. Yea Yorston of Boost Business Support told the Guardian “the hourly rate, which [she] has traditionally used for her virtual assistant business, offers no way of predicting [her] income from month to month”. This insight can help you tailor your own retainer packages for a fixed number of hours per month in which you can bill in advance. This will not only assist your cash flow but allow you to replicate this amongst a handful of clients in order to set a billing practice standard that can allow for future stability, planning, and peace of mind.