Regardless of the successes your business achieved in 2016, a ‘financial detox’ is an invaluable opportunity to take things to the next level this year. Like a personal detox, a business cleanse is focused on boosting energy levels and performance. Specifically, it’s all about understanding your financial vulnerabilities and cash flow pressures and creating a foundation to fund business growth.
Here are my top tips for giving your business a financial cleanse:
1. Default creditors
Take a look at your past year and identify customers that haven’t paid, made part payments or continually pay late. Understand the financial significance of this group and make some decisions around resolving this occurrence in your business which may include expelling these debtors, enforcing new terms or escalating to retrieve these debts.
2. Review payment terms
Evaluate your terms in relation to competitors as well as client history. If you are continually spending important business hours chasing payments you may consider new policies such as deposits, pre-payments or COD.
3. Set your budget
What are you looking to achieve this year? Set your budgets and forecasts in order to understand key cycles of high expenditure. By anticipating these waves, you can put in place financial structures to source or manage funding.
4. Evaluate your funding providers:
Do you have multiple loans in place? How much interest are you paying? It may make sense to streamline this area of your business and review the market for best offers. More and more small businesses are turning away from traditional banks and embracing alternate providers with faster access, competitive rates and flexible repayment options that align to your business results so you are not out of pocket when you don’t have a good business month.
5. Set and adhere to accounts receivable processes:
It’s easy to ignore late payments as you focus on your business but this has a negative financial impact that you need to be diligent in addressing.
6. Confirm your business targets:
By defining and building strategy around your income levels you can create the mindset and team focus in delivering these outcomes.
Applying these disciplines will reduce stress and support a more sustainable business. This is your chance to make 2017 your best yet.
About the author
Mark Hearl, is a leading business finance expert with over 16 years’ experience in the industry. He is the founder of Sprout Funding, a finance company specialising in small to medium business lending.