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Ten financial control tips for SMEs

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Friday November 5, 2010 at 2:56pm

Whilst cash for the investor might ‘Seriously Damage your Wealth’ in business cash is king and keeping close management of the cash in your business will protect you from disaster.

At Parker Chartered Accountants we put our heads together to come up with this list of tips for any business owner needing to gain greater financial control. Try them – they work!

  1. Raise invoices promptly and clearly state your terms of payment. Typical terms would be payment within 30 days. 
  2. Chase your debtors for payment once they exceed these terms. 
  3. Refuse further credit if a customer has not paid an outstanding bill. 
  4. Review prices on an annual basis at the very least, consider profitability, what the market will stand and the likely impact on your bottom line of making an increase. Often a small (less than 5%) increase in price can make a significant difference to your bottom line. 
  5. Negotiate with suppliers. Be smart when you are buying in supplies. Bulk buying may be cheaper but stockpiling materials is rarely a good idea. Try to get the best price for the amount you need. 
  6. Pay your suppliers within the terms they set, to keep a good relationship with them, but resist the temptation to pay immediately on receipt of their invoice. 
  7. Be smart in making payments such as rates, electricity, and telephone bills. These and others can be paid by monthly direct debit. This has the advantage of spreading the payment evenly over the year, and cutting down on the amount of time needed for administration in the business. 
  8. Save enough money to pay any VAT or tax due. 
  9. Review your cashflow forecasts and budgets regularly and compare them with your actual income and expenditure. Remember to adjust your forecasts for changing circumstances. 
  10. React quickly to problems. If you foresee problems, whether in cashflow, supply of materials or sales fluctuations take the appropriate action as soon as possible.

Putting in the ground-work by setting annual budgets, preparing a cashflow forecast and setting up some simple systems and procedures will mean you take control, and keep it.

Andy Parker
Chartered Accountant in Birmingham


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    Parker Chartered Accountants and Financial Advisors, 1192 Warwick Road, Acocks Green, Birmingham. B27 6BT.
    Tel: 0121 764 5161  Fax: 0121 764 7833  Email Parker Chartered Accountants here