Managing a small business is not an easy task and can face a range of unforeseen challenges. For a lot of small companies who find themselves having to close down their businesses, it often comes down to financial issues regarding inconsistent cash flow, payroll, debts, amongst others. However, these issues can be easily managed and overcome by implementing the proper solutions.
Below we look at the top 5 financial issues faced by small and medium businesses and how to overcome them.
Cash flow management is one of the most recurring issues faced by many medium businesses. Small changes such as proper cashflow management, creating a good invoicing system, accurately pricing your jobs and managing receivables and payables can have a huge impact on your improved monthly cash flow. They will also enable you to better track your cash flow. Implementing technology and automation can help make sure you can trail the time and costs of your labour and facilitate the way you maximise your access to capital.
Payroll for small businesses can be the biggest expense and can become the biggest financial challenge for many owners. So how exactly does one make sure that the labour cost is optimal – with little time leakage and increased staff productivity? Individual events of time leakage can add up collectively, across all staff members throughout the year and become a real profitability issue. The addition of an automated job costing system can be the answer to this particular challenge. Ensure that cash is put aside to cover employee wages taxes and superannuation payments.
It is not uncommon for small business owners to give their company a head start by taking on loans to help their launch. Depending on how well the business then performs, some might struggle with loan repayments. To make sure you are on the right track with dealing with your loan repayments or if you are struggling to consolidate your debt, talk to your business advisors who can help you get your finances back on target.
Financial reporting is extremely important to track revenue and expenses amongst other things. Creating reports consistently on a certain day of each month can help decrease business risks. Although it may be time-consuming to keep your bookkeeping up to date, it is crucial that you don’t fall behind on reporting to record any financial losses or missed deadlines that need to be actioned as soon as possible.
Getting your taxes done properly is critical in making sure your finances are up to date. Mistakes in your taxes can lead to fines and penalties from the ATO. Tax is complicated which is why it is important to ensure that record-keeping is done correctly throughout the year for all transactions. If you’re just starting out, it might be a good idea to consult an expert to help out.
Financial issues are a reality for many companies, especially for small businesses. If you need any financial or accounting advice or are struggling to get your finances sorted, give the team at Lawrence Group a call on (08) 9433 3288 today.