Why Your Financial Strategy is Essential for Your Business
Being an entrepreneur and managing your business finances is not an easy combination of roles to take on. And yet, the earlier you start, the better it is. Small businesses in India do not spend adequate time to manage their finances early on, and this does create an issue for the survival of these businesses. However, more and more businesses are realizing its significance and trying to tackle this problem head on.
How Small Businesses Manage their Company’s Finances
When Intuit India commissioned a survey on small businesses, and asked around 350 small businesses about the company’s priorities and what they could have done differently, they came up with some interesting answers. Around 78% wished to improve their financial management skills in the financial year. Nearly 75% of small business owners we spoke to are prioritizing investment in financial management for better visibility and control of their business. And almost 75% of small businesses understand the need to educate themselves on financial management – from the point of view of areas of investments, and the associated areas of impact.This trend is seen even among companies that have been in existence for a few years, and is certainly not just an issue faced by the new companies alone.
When Managing Finances on Time Matter
When these small business owners were asked: ‘How much time are you spending as a business owner with financials now as opposed to when you started up?’, around 41% of them answered that they are taking more time in getting their businesses in shape now than they use to earlier. So what stops business owners from taking an active interest in financial management early on? This is a key cultural barrier. Traditionally businesses have depended on CA’s and accountants to take care of their financial requirements. Conversely, the accountants commonly have limited access to business processes and objectives.A fallout is that accountants and book keepers often retrofit generic accounting tools into the business.
This often limits the business for opportunities to be flexible and agile in financial management processes. Small business owners need to acknowledge the fact that adopting financial tools doesn’t necessarily mean scaling down the role of an accountant, but in truth it enhances the productivity of the accountant. When asked why they needed to spend more time with financial management now vs when they started up, around92% of them have cited business expansion as the reason for getting their finances in shape.
Some other reasons cited are more invoicing (71%), aggressive marketing (64%), and more customers than expected (63%). 54% of business owners felt that the first year of operations was the most difficult because they did not invest in financial management. The majority said they eventually had to invest time in understanding the financials of a larger, more complex business.
Accounting: From Support Function to Strategic Advantage
Defining a financial management goal at the onset of your business makes a lot of sense for a business owner. What you see is what you believe, and what you believe is what you work for. Intuit India’s Vice President and Managing Director, Nikhil Arora, said, ‘Small businesses need to understand the importance of having clear visibility of their finances, only then will they be able to make informed decisions for the betterment of their business. Visibility enables business owners to incorporate better tools and processes into their existing systems. If executed well financial management will evolve from a mere support function to a strategic advantage.’ So here are some starting points for small biz owners:
- At the end of financial year, take stock of your finances
- At the beginning of the new financial year, check if you have the right tools to check financial health
- Set new financial goals for the new financial year
- First three years are important to set your financial management vision
- Financial planning at the right time can take your business ahead, so don’t sit on taking those firm decisions
- Invest in technology. Cloud, with its ease of access and low cost, can be the right partner for your small company.
For an insightful journey of being a small biz entrepreneur, read our white paper, Financial Management – An Essential Tool for a Healthy Business. The white paper, commissioned by Intuit India, reveals essential data on financial management trends and practices amongst small business in India. “Financial Management – An Essential Tool for a Healthy Business,” represents data collected via qualitative and quantitative interviews with 350 Indian small businesses. The small businesses researched have a full-time employee strength ranging from one to 99 and an annual revenue falling in the range of less than INR 60 crores.