Running a small business is your chance to make your mark on the world. Maybe you and your team have developed a game-changing product or service, or maybe you are making the best cakes in town. Either way, you doing your own thing is what it is all about. One of the more mundane aspects of running a small business is financing. Even if you aren’t a Wharton MBA, you do need a plan to track your business’s finances, so to help you out here are four hacks that work:
1:- Contract It
Whilst this might not appear to be a finance trick, using contractors is a great way to better manage your labor expenses. Even though contractors might be slightly more expensive on an hourly basis, they allow you to tap into skills which you only need on an intermittent basis. These short-term work arrangements help you to lower your fixed labor costs and by extension your insurance costs.
2:- Invoice, Invoice, Invoice
This is how you get paid, and you need to invoice as if the future of your business depends on it. But this hack is not just about sending out the invoice, it is also about invoice accuracy. This means making sure that all details are correct and that you have set up clear payment terms with your customers. Remember, a customer who does not pay is charity.
Invoicing correctly also has the added advantage of forcing you to keep your eye on the ball every day. A late delivery can cost you money, so you want to make sure that orders are delivered on time, every time.
3:- Banks Are Not the Only Funding Source
In this past, a business owner only had one choice if they needed financing. That is to put on their best suit and head down to the local bank to beg for a loan. However, times have changed and banks are no longer the only funding source. In fact, for most small businesses today, banks are the last choice.
As such, a small business owner should develop a list of reliable lenders who understand the needs of their business. This is especially true when borrowers look at a working capital loan. In recent years a number of lenders have cropped up who specialize in this form of finance for small business, and this means there is more choice than ever.
First, these lenders understand that small businesses owners need working capital loans fast. As such, there is no need to fill out forms in triplicate. Second, they have special programs which look at your ability to pay based on your actual sales and not a fixed monthly payment. This affords greater flexibility and allows business owners to focus on what is most important to them – running their business.
These lenders know that you don’t have time for filling out forms in triplicate. They know that what you need are straight answers which can help you solve liquidity challenges today. These programs can include purchase order financing, equipment financing, and even merchant advances – which is when you get a loan or a line based on future credit card sales. Times are changing, so why continue to go back to banks to meet the funding needs of a small business?
4:- Have a Plan
Without a plan, it is impossible to know where you are going. This not only includes long-term goals for your business but it also includes a process to track the financial performance for your business and how to review those results and affect change. Having a plan is hard work but not having one can be even worse as it leaves your business open to being blindsided. Look at the news, surprises happen.
The first step to having a plan for your business’ finance is sitting down with your accountant or trusted advisors to map out what is important. For example, if your business is highly seasonal, then you need to plan for this. If not, then you will face severe challenges in making ends meet. Furthermore, what is your plan for capital investment or inventory or even to set up a rainy-day fund? The only way you can be prepared to meet these challenges is to have a plan, track its progress, and adjust as required.