As a Small Business Owner, cashflow is the key to success, and forecasting enables you to look ahead and see where you’ll be in the future. Researchers at the London School of Economics have said that the two biggest obstacles facing small businesses are poor financial processes, and a lack of access to funding. The Bounce Back Loan Scheme recently enabled small businesses to easily access funding at a level that is usually impossible for a startup with no trading history to access. This has enabled some small business owners to boost their business with the funding that they wouldn’t normally be able to obtain, but what about the new businesses that will inevitably be created as job losses increase? Albion Centures, a venture capital investment firm says that only 1 in 5 SMEs believe cashflow is a major concern. Which shows there is a disparity between what the small business world is aware of, and the actual threat it poses.
So what can you do as a small business owner?
The key to cashflow management is firstly to take the steps we highlighted in last month’s Top Tips article, Top 3 Things to Managing Your Cashflow Successfully, and secondly to always be looking forward. This brings us on to the importance of forecasting. It will help you plan future decisions carefully (such as taking on a new team member, launching a new product, opening another office etc), but will also highlight any areas where you may struggle in the future and enable you to put in place measures to mitigate the risks. With an accurate forecast in place, you may have a better idea of when to invest in new equipment, stock or services rather than ploughing ahead with a ‘finger in the wind’ approach. With this information to hand, you can make decisions such as shortening payment terms to get paid quicker, reviewing credit control, inventory and purchasing processes and potentially looking at your debt structure (is refinancing an option?)
At Seed, we recommend using tools such as Futrli Predict and Flow to manage and monitor your cashflow and the things that impact it. If you would like to find out more about these services please do get in touch.