Professional pointers: Smart spending
How can you ensure your business is smart when it comes to spending whilst keeping productivity and performance on a high? Geoff Bates, business support manager at St Helens Chamber, shares some top tips:
We’re often approached by businesses which have been trading for some time and are encountering ‘money problems’. This could be down to cash flow or low profitability.
The first place to look for possible indicators is the most recent financial accounts. If an SME has not produced its final year end accounts within three to six months of its year end that in itself could be a sign of financial control problems.
Take a good look at the trade debtors – is this figure increasing disproportionately with sales? Is it in line with the sector average?
Review an aged debtor analysis to identify any problems. I recently did this for a company and when the book-keeper was asked for the information she resigned on the spot, admitting she could not cope with the business growth. We established invoices were not being chased efficiently and put systems in place that quickly turned a large proportion of the £150k debtor book into cash.
Be wary of offering discounts for prompt payment as this has an immediate impact on gross profit.
It’s not always possible to increase prices, but make sure you are not ‘giving it away’ – check what the market can stand and review.
Businesses that have been doing well can often become complacent with costs and overheads. Review your overheads and see what savings could be made: Are you reviewing your business insurance each year? Looking for the cheapest gas and electricity company? Spending money on advertising that isn’t showing results?
The key is to understand your business finances and where your cash and profit comes from. If you don’t you may survive by good luck rather than good planning. There are lots of organisations out there that can help, including your accountant, local Chamber of Commerce and even other business owners, but you will need to invest a little time if you want to grow