SMALL BUSINESS AS WE DO!

Part – IX

Financial Management

Cash flow management is the most challenging task for small businesses. Most of the time small businesses starts with small investments without much liquid money as back. Many hidden factors were not calculated in the initial plan and budgeting.  Small businesses also deal with similar small businesses or clientele and their cash flow issue also effects and this is kind of chain reaction. Poor resource management, inadequate sales and marketing efforts are also key factors behind cash flow issue.

To streamline cash flow below considerations are important;

1.       Budgeting

2.       Regular Profit and Loss analysis

3.       Efficient resource utilization

4.       Effective Sales and Marketing

In case of mismanaged cash flow following steps may help in managing cash flow.

1.       Expense cut

2.       Down sizing

3.       Increase in Price

4.       Short term loans

However, every step must be linked with business situation, sales forecasts and budgeting.

Most important of all is hiring a proper accountant and follow all accounting rules and processes.   Honestly speaking only two factors can make good stream of cash flow.

1.       Sales

2.       Profits

Strong, effective and realistic marketing strategy and result-oriented team to achieve sales targets is   important for business growth and at the same time pricing and payments terms must have detailed   consideration to cover all the costs, over-heads and enough profit margins that in case of any bad   times, organization should have cushion for back-up.

Without proper documentation, easy payment terms and leniency results in bad debts and hard to   receive from clients. This not only wasted lot of time but give further financial loss as resource   dedicated to receive also has cost.

Many small businesses follow pricing and other financial numbers as per market conditions or   market norms instead of their own calculations. This practice also resulted in less profits or no   profits. Every single business has its own circumstances and situations. This is right that one has to   follow market trends to compete in the market but considering own conditions is also mandatory to remain profitable and set adjustments accordingly. With proper budgeting, profit and loss calculations, sales targets achievements and resource utilization, this is not a big deal to remain and grow with reasonable profits.

Make Profits!

Writer, Shahid H. Qadri is Founder, CEO of PNTGlobal.com, small business dealing in IT enabled services since last eighteen years.