By Paul Sparkes, Product Director at IRIS Accounting & Business Solutions
Running a small business isn’t easy in the current economic climate. There is a lot of pressure for small and mid-sized enterprises (SMEs) to boost the economy and create jobs, but there isn’t much help and advice for them to do so. IRIS’ own survey among customers recently found that nine out of ten SMEs believe that the Government should do more to support business growth as confidence is falling.
At times like this, when banks are reluctant to lend and support schemes from the Government are yet to come to fruition, businesses need to look at where they can make improvements within their own organisations by identifying problem areas and streamlining their operations.
Below are three key points to keep on your business check-list:
Making financial health a company-wide concern
Monitoring the financial health of a business has traditionally been a responsibility for the finance teams. However with a changing business environment, businesses need to make sure that everyone is involved and that necessary processes and policies are in place to nip any possible issues or debt in the bud before any serious damage can be done. Put your policies in writing and circulate them regularly to staff, making it clear what their role is in tightening the noose on bad business debt. As a starting point, selling to customers — even long-standing customers - without checking their account and credit status should be a strict taboo.
Scrutinise your client base
Review your client base to identify which customers are profitable and which are not. This could lead to some tough decisions; however, as difficult as it is, a business will never stay on top of its finances and thrive if you work with clients who drain your profit levels rather than adding to them. Instead, focus on those that are most profitable, it’s worth taking time to step back and analyse each client or customer your business works with and the value they bring to your business. By doing this, a business will be well placed to decide where to invest resources for optimum return, both in retaining clients and pursuing new business opportunities.
Analyse where internal processes are undermining profitability
As well as identifying which clients are affecting your profitability, businesses need to consider how their internal processes could be streamlined to improve efficiency and reduce costs. Are resources being deployed to the best effect? Can managers or team leaders spot instantly where expenses are becoming out of line with available budget? With vigilant monitoring, businesses will be able to keep costs on track and increase profits by avoiding revenue leakage.
Clever technology will go some way towards helping businesses to make these decisions and streamline operations, but it also takes determination and discipline from businesses themselves if they are to really see the benefits from these changes.
Paul Sparkes is Product Director IRIS Accounting & Business Solutions