There are many factors to get right in order to grow your business: product development, marketing, customer loyalty and sales are but a few. Above all though, your business’ financial health has to be a priority and too few SMEs pay enough attention to their cash flow – until it’s too late.
To mark Small Business Advice Week, we’ve put together 5 tips for SMEs on how to grow successfully – and keep a positive cash flow.
1. Watch out for hidden fees
Financial assistance is vital for most growing businesses and there are many options to choose from. Financial contracts use language almost designed to confuse you so make sure you read everything carefully. Transparency is not every lender’s strong point so check the small print for any extra fees that may not have been presented upfront.
Entirely justifiable charges for administrative services are all well and good, but they do add up and you have every right to know what to expect from your loan agreement. Hidden fees and unexpected charges can render your business critical finance unaffordable – and unbalance your books. Download our Hidden Fees eBook to learn how to grow successfully by spotting them!
2. Spread your risk
Building solid, long-term customer relationships is very important to your company’s longevity. Focusing on only one or two key customers however, is not good for business. If all your eggs are in one basket, what happens when the basket drops and your working relationship comes to an end?
The simplest way to avoid any financial fall-out is to spread your risk: no one account should ever comprise over 50% of your sales ledger.
3. Prepare for the unexpected
Perhaps you need to expand your office space to make room for new hires. Or maybe your office hardware needs an urgent upgrade. Whatever the reason, unexpected needs can crop up for any business of any size and demand funds that may have been budgeted elsewhere. When you lack business critical capital at a crucial juncture, it can compromise your company’s growth.
An unsecured business loan, when offered on the right terms, can provide you with significant financial flexibility that takes care of the unexpected – and keeps your cash flow positive.
4. Manage outstanding invoices
Chasing invoices is a resource intensive task which can become a costly operational burden - especially for smaller businesses. That said, non-payment cannot be ignored as your cash flow depends on regular income to stay positive.
Invoice finance is an effective form of financial management that delegates the process to your creditor. Another option is to create and deploy an automated debt recovery system. Either way, until the invoice has been paid, you must restrict access to your services.
5. Stick to realistic payment terms
Before you agree to a 150-day payment term, assess your capital reserves and be clear about what you need and by when. Don’t agree to unrealistic timeframes for the sake of winning business, it won’t do your company’s cash flow any good in the long-run.
Many customers offer a supplier finance scheme that, for a nominal fee, assures payments are made on time. If you choose not to go this route, make sure your customers are incentivised to pay on-time, and make sure the value of your total invoice will cover any late-payment recovery.
Ultimately, in order to grow your business successfully, you need to ensure that your finances experience as little disruption as possible. With the right planning and preparation, you’ll never be caught on the back-foot.
Speak to one of our financial experts today and find out how to grow successfully with financial assistance and support tailored to your needs.