A lot of small business owners hope to optimize their finances, without even fully understanding all the processes that lurk beneath them. For instance, they hope to just magically start spending less and earning more, without ever figuring out what causes the most of their overhead. Sure, figuring out your major expenses is easy but there are some things you simply can’t skimp on.
Small Business Financial Processes
On the other hand, there are certain areas in which, with a bit of improvement, you can get a much better ROI ratio.
Here are six such areas.
Payroll Management System
The first on the list of expenses you need to deal with is your payroll, however, this process can easily be automated with an adequate payroll management system. The first thing you need to do is institute a transparent payroll policy so that you can allow your employees to monitor their own salary status and inform you if there’s any irregularity. In this way, you are minimizing the error margin by quite a bit. In fact, you could even take the next step and ask for an employee input in order to improve the overall efficiency. Finally, it is vital that you conduct regular, ongoing audits. That way can you ensure that your payroll management is up to date.
Handle your Cash Flow More Efficiently
The only way to constantly expand your business is to burn insane amounts of money. Purchasing new equipment, paying for all sorts of services and giving out bonuses to your employees are just some of the smart investments that will additionally complicate your cash flow. Nevertheless, you can analyze and improve your cash flow in more ways than one. For instance, you can cash in on your unused assets. Lease out equipment instead of buying it, so that you can return it and get newer versions without extra costs. Additionally, you shouldn’t hesitate to send your invoices the second your job is done. You’ve earned the money, why wait.
Provide your Business with a Capital Injection
In the previous section, we addressed the issue of better cash flow distribution, nevertheless, how can you distribute your cash better if there’s a shortage in your account. This can be solved in a couple of ways, each of which has its drawbacks and advantages. For instance, going to a bank for an additional loan is a traditional solution, yet, it involves an interest rate, possibly even a collateral. On the other hand, there are other ways to provide your business with some additional funds like opting for equity funding. This can allow you get more private capital and in this fashion reinvigorate your business.
Tracking your Inventory
The next step on the path to better finance processes for your business lies in the idea of tracking your inventory in a more efficient manner. For starters, in the 21st century, there is literally no excuse for not using a cloud-based inventory management software. In this manner, you can track the levels of your stock every step of the way. Needless to say, this can also help you identify the low-turn stock as well as use the FIFO (first in, first out) approach. Like this, you will be able to get the most out of your storage and drastically reduce the overhead.
Another thing you need to keep in mind is the fact that your fleet (for those businesses that have a fleet of their own) might actually stand to lose more money than it earns if your management is not good enough. This may sound simple, since the trick is to have your vehicles transporting cargo for as much as possible and have them travel without it for as short as possible.
Nevertheless, this oversimplification might not be enough, apart from being harder to pull off than it seems. Fuel efficiency, on-road safety and maintenance need to be your top priorities. One last thing, you need to keep in mind that the smaller your fleet, the lower the overhead. If by any chance, you feel like you need more vehicles, you might want to reexamine if something can be improved in regards to organization.
Efficient Decision Making
The last piece of the puzzle is the most abstract one, yet, it is probably the most impactful on your corporate finances. We are of course talking about the efficient decision making. Sometimes, in order to save money, you need to make counter-intuitive moves like turn down some business propositions. A failure to deliver on a deal may result in an additional fee, which means that turning it down stands to save you quite a bit of money. Moreover, additional automation is quite expensive but in the long run, it might be able to save you a small fortune both by minimizing the error margin and by boosting your efficiency.
One last thing for you to keep in mind is the fact that, in 2018, all of these services can be outsourced, while some of the minor issues can be solved with an app or a finance platform. Still, improving yourself in these areas require an investment of two resources that every entrepreneur needs to have in abundance – time and patience.
About David Webb:
David Webb is a Sydney-based business consultant,online marketing analyst and a writer. With six years of experience and a degree in business management, he continuously informs the public about the latest trends in the industry. He is a senior editor at BizzmarkBlog. You can reach him on Twitter or Facebook.