Reading this morning's Queensland Courier News (Article), it was quite confronting to see the number of small businesses in one specific region that have closed its doors in the last 4 years. This could be anywhere in Australia and seems to be an inherent problem for any small business no matter the location.
Some of the reasons given by the article for the closures were:
- Not managing cash flow well
- Biting off more than the business could handle
- Not doing enough research on the competition
- Understanding of simple profit and loss
Both researching the competition and setting your aspirations too high can usually be solved - or at least helped - by a basic business plan.
That said, cash flow and keeping ahead of your profit and loss is another story. Many small businesses tend to manage their finances with basic accounting software. There are many solutions on the market, some more popular than others. Even though these products are good at managing what has already happened in your business (i.e. historical transactions), they are not very good at managing what is going to happen in the future. This is why the number one reason that small businesses do not survive is not managing cash flow. There are many stories in the media about small businesses going broke even though they have a great product, niche market and great customer service. Problem is, without a good handle on cash flow, survival is always going to be a struggle.
If you want to look after your cash flow and therefore improve the health of your business, you need to make sure you are using software that is up to the task from Day 1. What a lot of people don't realise is that products that have these functions are actually almost the same price as the popular 'accounting only' software solutions. An example of an affordable product would be SAP Business One Cloud. It not only manages all the historical data within your business - it also gives you visibility into potential hurdles you may face in the future, helping you manage the situation before it's too late.
Some simple steps that SAP Business One can help when managing your cash flow
- Calculation of accurate and up to date daily opening balances
- Incorporating sales forecasts based on customer payment terms to better predict future trends
- Accruing expenses and recording purchase commitments to help with visibility of future outgoings
- Estimating stock level markers required for future growth by quantifying and date tagging when these investments will be required
If you want to find out more how an affordable product like SAP Business One can help you on your business journey, then drop us a line or contact us for a quick chat.