Seeing more go out than come in within a month, or debt that seems to continually be growing without the same levels of growth on the profitability front can be a real worry. Here are some of our top tips when it comes to smart money management as a small business.
1. Keep a watchful eye on your accounts
Regular reconciling of your accounts means you may be better placed to spot things like odd transactions, increases in money owing to you or cash flow trends before they start to impact the bottom line. That way you’re better placed to resolve any problems and make plans to hopefully avoid problems before they occur. Having the right finance product in place may help you ride out any bumps and may also prove valuable when it comes to safeguarding your business.
2. Think about what happens if a big client doesn’t pay or stay.
Suddenly you’re in a position where you might not be able to cover your costs and your future income takes a hit. It’s good to have a plan in place. A loan product like invoice finance can be a good way to secure the payment of invoices as soon as they’re issued. And there are many other products that can help smooth the ups and downs of cash flow.
3. Is your house on the line?
Many credit applications require personal property like your home to be put up as a guarantee against your debt. If your business fails it may significantly impact or cost you your house. It’s good to be aware that not all business loans require this. With some vehicle and equipment loans, the asset itself is the collateral. With invoice finance, the value of the invoices is the security. Talk to your broker today about the unsecured finance options that may be available.
4. Stay on top of payment obligations.
• GST & PAYG: Report and pay GST amounts on time to the ATO to avoid any potential late penalty fees. This is usually done online via the ATO website.
• Tax lodgements: Ensure your business’s tax liabilities are reported within the correct timeframes. For further information, refer to the ATO website.
• Insurance: Make sure you have adequate insurance and that all your premiums are paid.
Again, there are a number of finance products that may help you cover these obligations and more, whilst preserving cash flow and often without providing property as security.
5. Keep working capital available.
The more assets your business owns, compared to what it owes, means more working capital available to use for running the business, and investing in its growth. There are a number of finance products designed to help you grow your business, while preserving your working capital.
6. Know your obligations as a director.
Ignorance is never bliss. If you are a company director, there are many legal obligations that you must comply with, such as ensuring the company doesn’t trade while insolvent (i.e. while it is unable to pay its debts as and when they fall due). Ensuring adequate working capital is available and being up-to-date with your company’s finances can be critical at every step of the way. If you’re unsure, it’s always important to obtain professional financial and legal advice.
7. Have a business finance broker on your side.
Having the right finance in place for the day to day needs of your business, or to invest and grow your business over the long term, is important. But there are many different types of finance products and lenders out there.
Remember that a broker works for you, not the lenders. A brokers role is to help you find a finance solution that is right for you and one that works for you and your business.
Contact your broker today to have a chat about how they can help you.