SMEs have to take on a direct responsibility to review their business, assess their core offering as well as detect and repair cash leaks within their organisation which prevent them from maintaining a healthy bottom line. Here are some spring clean tips to enable you achieve a more effective and successful operation:
Reassess your business model, goals and objectives: If you are operating in an evolving market which is true in most business markets, now is the time to check that your vision and mission is still appropriate. Your business model may have worked 5 years ago, maybe last year, but how does it hold up today. What products are making you money or not making you money? Can you change your pricing model? Sweep out products and costs you do not need. Do you fully understand your overheads taking all your direct and indirect costs into consideration?
Review internal processes: Which manual processes need to be streamlined, computerised or made redundant? Are your basic bookkeeping processes effective and efficient? Do you need to review your other routine procedures including your credit control, invoicing and petty cash system? Should you be moving from a spreadsheet system to a computerised system to make better use of your sales and revenue figures and improve your performance? Analysing your figures will help in detecting the peaks and troughs of your business which will help improve your cash flow. Do you need to reallocate resources?
Review contracts: These include supplier contracts including credit periods, prices. Could you get early payment discounts or bulk discounts. Check employment contacts, IT contracts and arrangements, rates, rents and other such agreements. With your employment model, should you let go of people you will need in another year, or employ those you cannot afford? Could you consider outsourcing some work, using a part time long term resource or an interim provider?
Explore new funding options: If you are currently paying high charges on an overdraft, could you convert this into a loan and pay interest over a longer period, which will give you access to a bit more cash? If your overdraft is repayable on demand, you could miss out on growth opportunities and could face potential cashflow problems. Have you considered invoice financing? Have you considered not going to external funders and what cost cutting options could enable you do that?
Liabilities and legal implications: Before embarking on any significant change within your company, get advice on your legal obligations so that you are aware of the risks of every decision you make, if you go ahead with them. Speak with financial advisers, lawyers, accountants and financial management companies depending on your goals. We are in the midst of a tough regulatory regime and knowledge is power so invest in specialist support where your knowledge is limited. It would normally save you time and cash in the long run.
Get help! Do not try to do it all by yourself: Where you spot red flags, do not insist on taking it on by yourself to save costs. It could cost you more in the long run. Keep an eye on your management accounts. Monitor and evaluate key performance indicators or get someone who can to do it for you. Focus on the activities you are good at and get help in before you damage your otherwise successful operation. For help, support or information, email email@example.com or call 0845 129 9900.