Are SME owners financially savvy enough?

Here, we look at how to improve your financial management as a small business owner.

Lots of people believe that if they can come up with just one great idea they’ll be set for life. Their Dragon’s Den moment, if you like. The reality is that coming up with a great product or service is just the start. The hard part is actually making a successful business out of it. The problem is that many business owners prefer to play the role of the creative entrepreneur rather than the savvy financial type.

Not only could this end up hurting the fortunes of the company, but according to some experts a lack of finance awareness from SME owners could end up costing the economy 20 billion by the year 2020. Fortunately, the two ideas don’t need to be mutually exclusive.

Creating a budget

The first step to improving your finance is creating a budget. This should include your project sales and revenues, fixed costs– expenses that are charged the same price each month– as well as any variables that can change over time. Tallying this together will give you a better idea about how much money you’ll have leftover to tackle any unexpected costs, such as replacing a broken laptop. Most experts agree that you should overestimate your expenses to play it safe. This way, if you do go over, you won’t be unprepared.

While many businesses try to split their budget into 12 or 24-month plans, a new business may benefit from focusing on quarterly results to start with. This will be more time-consuming, but it will give you a better idea about how your finances change throughout the seasons. As you progress, you can make adjustments as you compare your predictions to reality. Remember, no matter how experienced you are, you’ll never be able to completely predict the future as economic climates can change quite suddenly.

Keeping track of your finances

Of course, creating a budget is no use if you don’t stick to it. Keeping track of your finances is essential if you want to keep your head above water. Fortunately, thanks to the wonders of modern technology there are now a number of great software tools that make this process much easier than before. QuickBooks is an accounting software package aimed at SMEs that includes both on-premises applications and cloud-based versions. Plans start from just £6 a month and include the ability to send invoices, estimate tax payments, complete self-assessments, and more.

However, since most of us are now doing more work on our smartphones, the ability to track your expenditure while on the move is crucial. Expensify is a free-to- use mobile app that allows employees to quickly scan receipts while categorising, grouping, and tagging their expenses in an organised manner. You can then submit this information to your financial department and get paid right from your smartphone.

Expanding your portfolio

Finally, any business owner thinking about the future should also be looking to expand his/her portfolio. You may feel that this will take away your much-needed focus from your existing products and services, but in the long-term it could be the difference between keeping your company relevant in the eyes of consumers. Try to stay on top of the changes in the market, as industries that once seemed miles apart can suddenly find themselves working together.

If you’re struggling to come up with the next big thing, move your attention to outside investments instead. Currency trading, known as forex, is the single largest liquid financial market in the world. While daily currency fluctuations are typically very small, thanks to day-trading FX is one of the most fast-paced markets you can be a part of. Thanks to the advent of online brokers, the market has been opened up to a huge demographic making it ideal for beginners looking to get started.

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