How to Better Manage the Finances at an SME

By Jamie Hill - 19 August 2019

BusinessExpert Voices

Financial management at a small to medium-sized enterprise is vital to avoid running into cashflow difficulties. This is especially true of newer companies where funds are tight, and sales are difficult to come by. Getting in new orders and speeding up the time it takes to receive cleared funds is sometimes the difference between making payroll and having to get a credit facility to cover it.

Here are some suggestions on how to better manage an SME’s finances.

Improve Receivables Management

Being studious about receivables management is useful for an SME with tight cash flow. There are now tools like the one from that provide better visualization of receivables and clearer payment processing, exceptions, and deductions to get a fuller picture of the financial side of the business.

Having access to additional information on outstanding invoices that make quick connections between past payees and new payments proves useful. Staff can better understand the inherent risk of non-payment and how concerned they should be when a payment is delayed. There’s also no hunting around for relevant details because they’re all easily accessible, which increases the efficiency in the finance department.

Set Business Budgets More Carefully

Financial budgets need to be prepared far more carefully than in the past.

Rather than rough numbers being entered, staff must research each line item in sufficient detail and liaise with whoever is necessary to get accurate figures. This way, expenditures are likely to be more predictable and reliable too.

The timing of spending also needs to be applied well. When it is unclear which month the expenditure will be required, choosing the earliest month is the best bet to avoid miscalculating cashflow badly and creating a shortfall.

Review Financial Plans Every Quarter

Companies that set a financial plan at the start of the year and don’t review it for the next 12 months often find things have changed in the interim. Such is the nature of business these days—it’s never stagnant!

By reviewing the financial planning and comparing actual vs budget for the months that have already passed, financial trends can be spotted. These trends can provide indicators about other sales or expenditure that’s been planned but now looks incorrect in hindsight. Either the sales season has been disappointing or expenditures are different because plans changed whilst the finance team wasn’t informed. By using a quarterly financial review, it’s possible to make prudent updates to existing financial plans to ensure they’re always approximately right than exactly wrong.

Look for Efficiencies Every Month

Following on from a broad financial overview every quarter, it’s useful to also examine past spending to see how it could have been less expensive. This might have been by purchasing in bulk from a cheaper supplier, choosing a different software subscription, buying office furniture rather than continuing to rent it, and so on.

Any insights into how purchases could have been less costly or offered greater value can be applied to future spending plans too.

By managing business finances better, companies can get through tougher economic times unscathed or produce a profit when otherwise they would have just broken even. It’s always worth putting in the extra effort to get a better bottom-line result at the year-end.

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