Juha Koski, Managing Director, MadBid.com
Managing Cash Flow
One of the easiest and most effective ways to oversee and manage your finances is to invest in some good accounting software, which will let you keep track of your cashflow, generate invoices, calculate VAT and forecast your income.
At MadBid we use Sage, in combination with working capital and cash flow forecasts in Excel. With these, forecasting and analysing is made simple not only saving you time, but also reducing your accountant’s bill in the long-term. That said, it is also important to have a reliable and competent account and/or financial planner, as well as making sure you also understand the basic principles of financial management yourself, rather than relying entirely on your banker, accountant or business tools.
Keeping Finances Low
Even though we are now officially out of the recession, it is good practice for every business to manage its finances as though we were still back there. That is to say, adopt a business model that saves money and focus on keeping fixed costs as low as possible, stripping expenditure back to a minimum. Consider ways of maximising your existing resources to free up some funds.
For example, take a look at your current office set-up to see if you could save on overheads — could you sub-let part or consider flexible working for some employees? Review your current systems to see if you are as efficient as you could be. Look at all areas from your buying structure and suppliers to the IT infrastructure you use. By changing our buying structure at MadBid to a centralised European one we have been able to get better wholesale discounts on the products we buy and sell, which has made a big difference to our overall cashflow.
Credit and Collections
Not the most enjoyable of tasks, but absolutely essential, especially for small businesses. Put the right systems in place, so you can quickly and effectively collect the money that your customers owe you. Considering a smart credit policy in the first instance, for example “payment terms within 30 days” will mean you won’t need to spend all your time collecting overdue accounts at a later date. If you run an ecommerce business, implement an automated payment system, something which we have done at MadBid.com, which enables customers to easily and efficiently carry out transactions online, with no manual intervention necessary.
Analysing your current financial position
By examining your business in more depth you will be able to identify problems before they become unmanageable. Carry out a cost and profit analysis to determine the true cost to you of providing your product or service. By reviewing your KPIs, revenue and COGS (Cost of Goods Sold) figures on a daily basis, as well as looking at profit analysis each week, something which we do at MadBid, you will be able to identify changes or problems quickly and react immediately. Staying on-top of numbers is key in any SME and closer you can analyse KPIs in real time, the better.
Sourcing External Funding
For entrepreneurs and companies looking to grow, securing the right investment can make all the difference. The most important things for an entrepreneur who wants to secure equity investment is to establish their credibility with the VC, which includes: thorough preparation; having a clear and detailed business plan and awareness of all your business facts and figures including details of business performance and successes to date, company growth and projections over the next 1-2 year.
By having the correct financial systems and procedures in place and running smoothly, you will be able to direct your focus on managing the rest of the business.
For more information visit http://www.uk.madbid.com