In this financial management guide we introduce you to financial management must-do’s, definite don’ts and the tools all small business owners should be using.
Bridget du Toit, head of sales and services at EasyBiz Technologies offers advice for entrepreneurs looking to get on top of their businesses’ finances, including:
– How to work with a financial planner
– The do’s and don’ts of managing your finances
– How technology tools can help
The role of a financial planner or adviser
Many entrepreneur may feel they lack the financial expertise to put together a financial plan, but that should not stop them from making it a priority, says Du Toit.
“A financial adviser can raise red flags, identify opportunities and assist entrepreneurs in getting to grips with their finances, giving them helpful advice on exactly what they need to do to secure the future of their businesses,” says du Toit.
Du Toit’s do’s and don’ts
1. Do your homework – This first step is about getting an overview of your finances. It is absolutely critical for any business, but especially so for small businesses that don’t have the luxury of a huge cash pile to fall back on in times of trouble. Without this, business owners run the risk of overspending and making poor financial decisions.
2. Keep track of your records – Entrepreneurs should be diligent about keeping evidence of all their financial transactions such as receipts, statements, invoices, purchase orders, etc. This will help them if they need to apply for finance – as many lenders want to see evidence of proper record keeping.
3. Take advantage of support programmes – Find out how the South African government and large corporates are assisting entrepreneurs with funding, training or mentorship and partnerships.
1. Overestimate income or underestimate expenses – This could have devastating outcomes. It is better to be cautious about projected income, especially when starting out. Numbers on financial plans should be adjusted based on market and industry trends, political realities, competitors’ performance and own performance.
2. Not have a plan – Entrepreneurs need to bear in mind that risk is an inherent part of business, especially for startups. It is important to initially focus on the business plan, budget and financial forecast. Then find clients, create a marketing plan and build the business. Entrepreneurs who have the right plans, relevant documentation and a firm belief in the business are more likely to attract funding from interested investors.
3. Forget to pay your taxes – While starting a new business is challenging, omitting to pay taxes will have a negative effect down the line. Entrepreneurs need to educate themselves on tax rates, rules, filing deadlines and penalties in their industries – not to do so could put a fledgling business in peril.
Du Toit’s list of recommended financial management tools
1. Accounting Software – Whatever program entrepreneurs choose for their accounting, they need to make it work for them by choosing a tool that’s both robust and as flexible as possible.
They should look out for the following features: basic accounting tasks such as invoicing, expense tracking, and client/vendor contact management, automation of billing and recurring payments, quote and estimate creation, tax preparation, multiple-user access, payroll processing, mobile access, and integration with program such as point-of-sale software, credit card processing and Google Apps.
2. A Payroll Management System – Payroll management is time-consuming and it is easy to make mistakes. It’s a good idea to investigate some of the online offerings such PaySpace that can help streamline the payroll process, keep entrepreneurs SARS compliant and eliminate costly errors.
3. Cash Flow Analysis – Whether entrepreneurs use their accounting software’s cash flow statement capability, a cash flow-specific tracking tool such as Float, or a simple spreadsheet to accurately measure their cash flow, they will be able to keep abreast of their cash balance and harness past patterns in data to forecast their financial futures.
4. Inventory Management – Entrepreneurs can efficiently track their inventory from the purchase of resale items to the fulfillment of a customer’s order via cloud-based solutions such as SOS Inventory. Not only does it track goods and generate sales reports, the solution can set up automatic low inventory alerts and manage order packing and shipping.
5. E-commerce Solutions – Increasingly, customers expect to pay for products and services instantly via credit cards or their mobile devices. Entrepreneurs can meet this need through e-commerce tools such as iKhokha, PayFast, Yoco, SnapScan and Zapper.
6. Expense Tracking – Business expenses such as petrol and meals can accumulate quickly. They are notoriously hard to track. Expense report tools such as Expensify or Xpenditure allow receipts to be scanned. Cash expenses can be added and uploaded on mobile devices and the information for approval, rebilling, expense accounting, and reimbursement can be easily imported.
7. A Business Credit Card – Entrepreneurs should consider opening a business credit card to improve their business credit history. This will help them to gain access to higher credit limits for business borrowing and get business related rewards and discounts.