Managing Cash Flow, Improving Business Margins and Stretching SME Budget. How?

05/10/2020 11:33

A frequent question as a small business owner, finance manager or financial director you should be asking is, "How best can I/we efficiently and cost effectively use our existing funds and available lines of credit to stretch them further whilst generating the maximum return for capital employed?"

Below are examples of strategic financial management changes small businesses and even large corporates alike can make to improve cash-flow, margins and make the best use of existing resources or budget. 

"It is not the lack of resources" that is the culprit in most cases but rather, "the lack of resourcefulness!" that most small businesses need to focus on and improve!

Like in the case of Guerrilla Marketing, "achieving conventional business goals, using or via unconventional methods", whose main ingredient or input is not Cash but rather.. Time & Imagination.

Michael E. Gerber in his book title, "Emyth" talks about the Emyth Small Business. A business where the system is the solution rather than trying to find and hire extraordinary people whom are very few . Great businesses, he goes on to explain, are built by leveraging ordinary people with extra-ordinary systems and managing the system & processes rather than trying to manage people.

We aim to deliver much needed capital for SME’s and Property Developers.

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Business Systems & Technology

With the advancement in technology and wide spread use of Software As A Service (SAAS), small business can and MUST reduce expenses as well as enhance efficiency in all areas of business and data capture, processing as well as reporting are a great 1st starting point.

Business must embrace technology as well as, not only have a presence online, but, be fully engaged using the online medium as a cost effective platform to acquire new customers, as well as for continual engagement with existing customers, to ultimately not only satisfy their needs, but more importantly, delight as well as anticipate future needs and trends.

Simply put, "produce more with less".

Raise Your Prices

"Are you crazy! Do you realize what's going on in the world!? " Is the first and standard reaction of all businesses across the globe. "We can't raise our prices as we will lose business to our competitors"

Pricing alone is rarely a long term, "sustainable durable competitive advantage", as Warren Buffet would put it. This is Berkshire Hathaway's number #1 value investing criteria.

Unfortunately in most small businesses, only 20% of the customers make up for 80% of the profits meaning the larger portion or 80% of existing customers are more hassle than the time and effort small businesses invest. Yes! Counter intuitive it is, but, by raising your prices, you will weed out the non-profitable and more than likely non-loyal customers.

Improve Your Outstanding Debtors Collections Process

Ensuring prompt customer payments if not upfront payments is one simple way to manage and improve small business cash-flow. Having a invoice online payment option is a must.

Focus on ROE/ROI for Every Pound Spent

Small businesses need to focus and ensure that every penny is spent on business aspects or areas that generate the most or protect revenue. Results or performance based expenditure means expenses are tied to revenue and or profit generating centres.

Eliminate marketing activities that are not producing any quantifiable results to your bottom line; extra staff that the business doesn't really need or not fully leveraging and this includes internal as well as external. Externally this may be professional advisers not producing quantifiable business results that actually matter.

Cash flow finance (Invoice Finance, Invoice Factoring)

Whilst there’s never one size fits all policy when it comes to business finance across business sectors, invoice finance or invoice factoring can go a long way in alleviating cash flow tied up for business use.

Example sectors suited to or ideal for Invoice finance are...

Product Wholesale
Manufacturing
Engineering / Fabrication
Transport / Haulage
Recruitment

Marketing / Advertising
Printing
Security / Man Guarding
Reactive Maintenance

Cleaning
Telecommunications
Food/drink
Breweries

Computers / Technology
Recycling / Waste management
Clothing / Fashion
Events management

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By CEO, GIC Capital