In the following financial management guide, we explore the various financial management musts and the tools which all small businesses should have in place.
What is the role of a financial planner or advisor?
It’s a prevalent theme that several entrepreneurs feel that they lack the proper financial acumen to develop a financial plan, but this should not stop them from making it a top priority.
An excellent financial advisor can raise any red flags, glean opportunities and aid entrepreneurs in learning the ropes of their finances and provide invaluable advice on what exactly is needed to ensure the future success of their companies.
Let’s take a look at some “dos.”
Do your homework. The first crucial step is determining a clear view of your financial situation. It’s imperative for any business owner, especially small business owners who don’t have substantial cash reserves to rely on during times of crisis. Withouth a sound understanding of your cash flow, you run the risk of overspending and making financial blunders.
Keep proper track of all records. As entrepreneurs, we need to be meticulous in keeping all evidence of financial transactions, which include receipts, statements, invoices, purchase orders and so forth. By doing this, it will help when you need to apply for financing, as most lenders require evidence of diligent record-keeping.
Take advantage of support programmes. Ensure that you do your research as to how the South African government and significant corporates can assist with funding, training, partnerships and mentorship.
Overestimate income or underestimate expenses. Not adhering to this could have disastrous results. We advise being cautious about your forecasted income, especially when starting your business. Your numbers and financial plans need to be continuously adjusted according to market and industry trends, political realities, times of crisis (such as the COVID-19 pandemic), your performance and your competition’s.
Have no plan. As an entrepreneur, you need to consider that risk is an inherent factor to any business, especially if you’re a startup. It’s of vital importance to initially focus on your business plan, budget and your financial predictions. Following this, you need to find your clients, develop a sound marketing plan and build your company. Entrepreneurs who fail to plan appropriately, who lack the correct documents and a passion and belief in their businesses are less likely to attract potential investors.
Forget SARS. Of course, starting a new business is a challenge, but failing to pay taxes will harm your company and name in the long-term. Be sure to educate yourself on tax rates, rules, filing deadlines and penalties in your industry. Failing to do so, could result in your fledgeling business failing.
Let’s take a look at some recommended financial management tools:
Accounting software. Whichever program you select for your accounting efforts, you need to ensure that it works for your business by choosing the most robust and flexible tool. Be on the lookout for the following features: invoicing, expense tracking, client/vendor contact management, billing automation, estimate and quote creation, tax preparation, multiple user access, payroll processing, mobile access and any possible integration with point-of-sale software, credit card facility and Google Apps.
Payroll management. Payroll management is laborious and time-consuming, and the margin for error is high. We advise investigating online offerings such as PaySpace which can streamline your payroll processes and keep you SARS compliant while eliminating costly blunders.
Inventory management. Business owners can effectively track their inventories, from the purchase of resale items to customer order fulfilment via cloud base solutions like SOS Inventory. In addition to monitoring goods and generating sales reports, this solution is easy to set up and comes with automatic low inventory alerts and can manage your order packing and shipping should you require it.
Cash flow analysis. Utilising a cash-flow specific tracking tool like Float, or a simple spreadsheet to effectively manage your cash flow, will enable you to keep track of your cash balance and utilise past spending patterns to forecast your financial future accurately.
Tracking expenses. Company expenses such as petrol, Ubers and meals can build up fast and are notoriously challenging to track. Consider using tools such as Expensify and Xpenditure as they allow receipts to be scanned. Moreover, cash expenses can be added and uploaded via your mobile device with the information required for approval, re-billing, cost accounting and reimbursement being easily imported.
A business credit card. It would help if you considered obtaining a business credit card to improve your company’s credit history. Doing this will help you gain access to increased lines of credit for business borrowing, and you’ll be eligible for business rewards and discounts.
e-Commerce solutions. In today’s world, customers are becoming more familiar and comfortable with paying for products and services instantly via credit cards or their mobile devices. Meet this need by implementing e-commerce tools such as PayFast, Yoco, Snapscan and Zapper.