The research also found that just half (52%) of the respondents who claimed their business was financially well managed passed the financial fitness test. Not all is lost, however, as there are several resources small businesses can draw on to make sure the financial health of their business is in tip-top shape.
Support or Solo?
Obviously, as a small business owner, there’s some compulsion to Do-It-Yourself and only spend when it’s an absolute necessity, but when is avoiding help detrimental to your company? Most normal bookkeeping operations can be handled by software, but as business problems arise, it’s worthwhile consulting an expert.
Baby boomers are more likely to use a financial adviser compared to Gen X and Y, the Intuit study showed, while 53% of respondents do their own Business Activity Statements despite only 40% having a basic understanding of business finances.
Deciding whether to bring in outside help is up to you, but asking yourself some questions can help you get a clearer picture. Are you losing control of who owes you money and how much? Do you need tax or financial legal advice, or perhaps you need some help writing a business plan? Experts are there to help for a reason: they know the rules and regulations of their job inside out. The cost of hiring a professional is cheaper than a big mistake down the track.
Invest in Tech
Intuit research demonstrated that a lot of businesses still keep records using manual inputs, such as pen and paper (22%) and spreadsheets (42%), while just 9% of startups use cloud accounting software.
At the same time, the study revealed that the majority (61%) of new businesses invest less than $5,000 into starting their operations.
It can be hard to determine the impact technology has had on productivity, but technology has definitely provided us with a means to work remotely – whether at the beach or from a home office. Further, tech saves you time, it can help with inventory management, it can improve your marketing and can cost less than a Netflix subscription.
Get a Grip on Cash-Flow
Your business’s longevity depends on careful cash-flow management, so it’s vital to take stock of all the outflows in your business, such as leases, credit card bills and payroll. Even when you make a profitable sale you might be caught short trying to pay off debts, which could leave your startup in a precarious position.
Here are some tips for better cash-flow management:
- You will always need a certain amount of working capital in the bank to do business. A good rule of thumb is to keep three months of outgoings at any one time
- Get a cash-flow forecast for the coming year to help you better manage money. Also plan for month-to-month expenses
- Speed up the cash conversion cycle: 180 days or more is standard. Get customers to pay a deposit, put them on retainer or pay monthly.
- Open up all avenues of payment: BPAY, PayPal, AMEX, Diners Club, and why not Bitcoin while you’re at it?
Keeping your startup above water has a lot to do with the owner’s diligence, and reaching out when you need help. There’s no reason for your business to become another statistic, provided you’ve got the information to make it work.