How to Manage Your Small Business’s Finances Successfully

May 15th, 2023 Rumzz Bajwa Leave a comment

A lot goes into running a successful business. You need a strong team, a good product or service, marketing that reaches the right target, and more. But a part of business success that often gets underrated is the importance of managing your finances.

Improperly managing your finances can often spell the end of your business, and ultimately lead to failure. You need to have a financial plan and strategy, always be aware of how much you are bringing in, and ensure you are always prepared for tax time.

With that in mind, this guide is going to go over a few good tips to help you successfully manage the finances of your small business and stay on track.

Build Your Business Credit Score

First and foremost, you should make an effort to build up your business credit score. If your credit isn’t in a good place, it can make borrowing money more difficult and a bad credit score can often show vendors, lenders, or suppliers that your business carries a lot of risk.

You can build up your business credit score by using credit responsibly, keeping your utilization low, and making sure you always make payments on time. You won’t get great credit overnight, but with enough time and some dedication, you can certainly improve your score as a business.

Even if a bad business credit score doesn’t disqualify you from borrowing money, it will be more expensive due to a higher interest rate. Also, if you have collections or other negative marks on your credit report, it is a good idea to deal with them. Getting these removed can improve your chances of getting approved for credit and loans.

Make sure to check out your business credit report often, to ensure there are no mistakes or other issues that are negatively impacting your score.

Use Software and Technology When Possible

Trying to manage all of your finances manually can often be a disaster waiting to happen. Not only can things be misplaced, but mistakes can be made incredibly easily. It also takes a lot more work and effort to record every transaction or keep track of payments with paper and pen.

Instead, consider using technology when you can. This includes pieces of accounting software, tools to automate invoices, software to track sales and/or inventory, and more. It can make your financial management much simpler, quicker, and more effective. Sure, getting used to new software and methods of doing things may be difficult, but once you get a hang of it, it will save you a ton of time, effort, and money.

There are many options out there, and many of them are affordable enough for businesses of all shapes and sizes to try out. Make sure to do your research on the different options, and consider trying them out to see which works the best for your needs.

Monitor Your Spending and Create a Budget

Another important part of managing your finances is monitoring your spending to ensure you aren’t going overboard and putting your company at risk. Perhaps the best way to monitor your spending as a business is to create a budget. A budget will show you exactly how much you are spending every month, so there are no shocks or surprises.

Not only does it help you see how much you are spending, but also where that money is going. This can help you identify areas where you are spending too much. In addition to watching your spending, a budget can also be helpful to track cash flow and see how much revenue you are bringing in.

Of course, budget only works if you put in the effort to keep it current and updated, so make sure to stick with it. You can budget manually, but it is often better to use a piece of budgeting software to be able to enter and check things quickly, and from any device.

Keep a Cash Reserve

Another important thing to keep in mind is the importance of keeping a cash reserve. This is simply a little bit of extra cash that you keep around, just in case your business needs it for something.

An unforeseen issue popping up is common in business, and you need to be prepared. This could be a machine breaking down, your revenue slowing down, property taxes increasing, suppliers adjusting their prices, and more.

The amount you should keep varies, and can often depend on the costs associated with your business. The higher your costs, the more you should keep in reserve in case business slows down. If you don’t keep any extra in case of a business slowdown or unforeseen issues, your company could find itself in some trouble if you get unlucky.

This cash should be kept somewhere stable and secure, where it can be accessed quickly and easily if need be. For example, you wouldn’t want to keep this in a risky investment.

Don’t Be Afraid to Borrow

While keeping cash reserve is good, don’t be afraid to borrow money, either. Many businesses are hesitant to borrow, either for fear that things will get out of hand and they won’t be able to pay it back, or because they would simply rather spend money they actually have.

However, as long as you do it intelligently, getting a business loan can be a great way to reduce financial strain on your business. It can help you expand your operations, deal with surprising expenses that come out of nowhere, and generally scale up over time.

Of course, whenever you get a business loan make sure to take a close look at things like the terms, interest rate, and other rules. Also, ensure the lender you are working with is legitimate and trustworthy, too. If not, you could find yourself locked into a situation that hurts your business more than helps it.

In conclusion, we hope that this guide has been able to help you successfully manage the finances of your small business.

Archives, Global Logistics, Global Trade Daily, Special Reports

To Really Move the Needle, You Must Move the Financial Needle First

October 13th, 2021 Ali Hasan R. Leave a comment

Today’s supply chain management and manufacturing executives live in a finance-driven world, managing profit and loss sheets, dealing with working capital issues, and collaborating with CFOs. Furthermore, the ultimate measurement of a company’s performance is often the stock price or valuation, which is why you should start every day with the same mindset and look at your business’s financials.

When you examine financials, you should always have your specific goals in mind. The market is bursting with tools that promise to increase throughput, boost sales, and solve all kinds of issues, but it’s vital to focus on your own goals and objectives. What problem do you want to solve? How can your data help reorient the material flow to free up cash without jeopardizing the business?

Ultimately, most executives have three priorities: making more sales, managing variable costs to improve margins, and keeping customers happy. When I look at financial reports, I’m really interested in seeing the inventory and the cash flow statements, because the health of supply chain and manufacturing operations is often reflected in the cash positions and inventory of a company.

Measuring Financial Health in the Supply Chain

Instead of getting straight to the nitty-gritty and doing defect analysis on every production line in every factory, it’s critical to understand where the constraints are from a demand perspective. Look at historical data to determine best-case scenario demand and worst-case scenario demand, and apply data from the end-to-end supply chain to start mapping demand and identifying capacity constraints.

The farther upstream bottlenecks are, the more value they’ll create naturally because there’s always a bullwhip effect. By eliminating them, you can either sell more products or capture more market share.

If you want to increase your bottom line, that’s the process to use. Look at financials first to map out the value chain and see where inventory is most concentrated. Then, identify opportunities to free up cash and address immediate bottlenecks by investing in capital expenditures or reorienting the material flow. Both are quicker options than, say, getting injection molding machines installed on the production floor.

Supply chain management is a delicate balance of financial and operational processes, and business growth requires the right perspective. To move the needle at your organization, prioritize these strategies:

1. Remember that cost optimization doesn’t cause growth.

Anyone with a college degree can come in and cut costs. It’s not difficult, and engineers are constantly focused on making technologies that are cheaper and faster. The issue is that a lot of the people who generated growth before the cost-cutters arrived made a deliberate effort to create excess capacity that can support a certain environment.

Everything’s about pennies and dimes these days, but instead of trying to be as cost-centric and effective as possible, a growth mindset requires you to focus on what’s selling and find out how to make your supply chain faster. The more orders you can fulfill, the more money you can earn. If you want to grow, you can’t start by cutting costs. Instead, figure out what’s selling and reorient material flow to turn that product over faster and build up your cash reserves.

2. Step back and measure your efforts.

Supply chain and manufacturing executives are incredibly busy with day-to-day operations. However, it’s important to take a step back, look at your performance data for the last three to four years, and see if the effort you’re putting in is actually leading to sales.

We live in a world where IT is integral to everything, including connecting downstream sales data with operations. This data can help generate forecasts, mitigate risk, and even produce crisis management plans for all the different scenarios that could play out. When you can look at performance data on a global scale, it can build resilience, reduce the waste in your supply chain in the form of buffers, and ultimately preserve your cash flow for growth.

3. Work more closely with the C-suite.

Don’t position yourself as a cost-centric value add. Today’s procurement and supply chain executives are all about getting the best deal, but that doesn’t really matter. It’s great if you can get the best deal, but it’s far more important if you can get customers buying more and logistics providers and suppliers moving the next products into place with the fastest turnaround times.

Executives in supply chain and manufacturing need to have the ear of the CEO and CFO and have an idea of all the levers in the business. With a holistic, end-to-end view, supply chain manufacturing executives can come up with operational improvements and confidently tell sales, “This is what we can realistically make.”

Supply chain and manufacturing executives need to quit the penny-pinching and recognize that cost-cutting measures can’t achieve the groundbreaking growth they want. Once supply chains are accelerated and product is moving off the shelves, you can start looking at the challenges that emerge on a global scale and identify different resources that could help overcome those challenges and demonstrate proven ROI.

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Ali Hasan R. is co-founder and CEO of ThroughPut Inc., the AI supply chain pioneer enabling companies to detect, prioritize, and alleviate dynamic operational bottlenecks. Ali has unique experience in onshore and offshore supply chain management in the U.S., Russia, United Arab Emirates, Saudi Arabia, Pakistan, Bahrain, and Yemen.

Archives, Banking, Global Trade Daily

Uncover New Opportunities from a Return on Experience

December 30th, 2020 Derek Halpern Leave a comment

The pandemic, though terrible, has given us much-needed time to pause, reflect, and perhaps make some changes to the way we live our lives. We have a chance to reevaluate what is really important to us. What brings us happiness? What drains our energy? What experiences add meaning to our days? Which ones take it away? We have an opportunity to face this challenge in a way that makes us better people.

Businesses are on a parallel path. With the diminishing of old norms comes the possibility of reimagining our old processes. That has brought about an acceleration of technology adoption across virtually every industry. Still, there’s another storyline emerging as well—the rise of what Heather E. McGowan calls The Human Capital Era. McGowan believes that the workforce has exhibited incredible resilience and creativity during the pandemic. They’re “an asset to develop rather than a cost to contain.”

I’m all for it.

Everyone knows the term “return on investment”—or “ROI”—meaning you get more monetary value out of something than what you put into it. But money is not the only measure of value. As we take stock of our business and personal lives, I think we should re-establish a lesser-recognized concept: return on experience.

Return on experience is significantly more objective than a return on investment since the measurement varies by opinion rather than hard numbers.

For example, we all have gone out to have dinner and found that the bill was more expensive than expected. Maybe the food was just so-so, you had a long wait time, or the server was brusque. Whatever the reason, it just wasn’t a great experience. But you might gladly pay twice as much for dinner where the food is delicious, or the service is kind and attentive. That’s what I think of as return on experience—getting value beyond what money can buy.

We embrace this concept more easily in our personal lives, where there’s less accountability for how we spend our money. For example, pre-COVID, I enjoyed traveling with my wife and two kids. Those trips were expensive, even after accounting for the hotel points and airline miles I’d collected. But the memories will stay with us forever, long after the cost has been absorbed and forgotten.

When you think about your business and your accounts payable team, what is the return on experience from antiquated methods like processing checks? What is the opportunity for growth? One person can’t cut or sign checks much better than another. There’s a limit to the impact you can have by stuffing checks in envelopes every week. It’s the opposite of a good experience.

Incorporating automation in your back office is a good way to tackle ROI and ROE simultaneously. When you have removed mindless tasks from your AP team’s plates, they are free to spend their energy on more interesting, strategic, and valuable tasks. I think that’s an initiative that’s well-aligned with the Human Capital Era.

As we re-examine our lives and our businesses, let’s remember what it means to evaluate something in the first place: to judge or calculate the quality, importance, amount, or value of something. And in that calculation, consider the return on experience in terms of your business, beyond money. It’s about setting yourself and your employees up to live and work in a high-quality environment—one that encourages personal and professional development.

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Derek Halpern is Senior Vice President of Sales for Nvoicepay, a FLEETCOR Company. He has over 20 years of technology sales and leadership experience, including 16 years in the fintech and payments space.

Archives, Banking on Global Trade, Global Trade Daily, Special Reports

How AI-Driven Technology Can Make Expense Management Faster, Smarter, and Easier

November 18th, 2020 Andrew Foster Leave a comment

Now more than ever, finance chiefs and their teams are looking to technology to redefine finance management, freeing up time from manual tasks to focus greater attention on analytical matters. Yet, given the vast array of existing and emerging technologies, it’s often difficult to know where to start.

For many organizations, travel and expense management is a prime candidate for automation, with existing processes still manual, time-consuming, and error-prone. Today, customizable AI-powered technology exists not only to automate travel and expense management but to do so intelligently, enabling organizations to set their own rules and decision-making criteria based on their specific requirements.

AI technology is perfectly suited to this area. AI looks at everything – every transaction, every line item – spotting duplicates and anomalies over time and learning as it goes. AI also sees each transaction in context, not in isolation, and can identify problematic patterns across a large number of different users and companies.
There are many ways that the use of flexible AI-powered expense and audit technology can help enforce an organization’s specific policies. Here are some examples:

Different thresholds for specific projects

There may be different thresholds and expense policies that apply to specific projects within an organization. For example, first-class train travel may be allowed for a client project but not for other purposes. AI-based systems enable the automatic creation of custom rules to monitor spend within specific general ledger codes that represent particular client projects and company events.

Configure remote work expenses

With more employees working from home, and office hours now far more flexible, applying work-from-home policies automatically has become a big area of focus for many organizations. AI-powered expense audit technology can use dynamic conditions (such as who is working remotely on a given day) to apply different work-from-home policies automatically. If someone who is working from home submits a travel expense claim, for example, this will be flagged for further review.

Check for compliance variations

Organizations need to ensure compliance with anti-bribery and corruption regulations, such as the US Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act. These prohibit bribery (gifts, meals, entertainment, cash compensation, employment opportunities) in connection with international business, and violations carry civil and criminal penalties. This can be a complex undertaking because there are often specific variations or exceptions that need to be tracked. AI-based systems enable the creation of custom lists of requirements to detect these distinctions automatically.

Understand different documents

Many organizations require pre-approval for specific expenses, such as entertaining clients at a sporting event. Employees typically need to submit a signed business justification document along with their expenses. Although the format of these documents differs between organizations, AI can read, understand, and audit pre-approval documents, to make sure they have been signed off and company policy is followed.

Manage lifetime employee perks

Some employees are given a specific amount of money that they are allowed to submit for reimbursement over time, such as a lifetime or annual allowance for productivity tools. With customizable AI-based systems, it is easy to create custom rules to keep track of these expenses for each employee, to ensure they don’t exceed their allowance over time.

Flexibility needed more than ever

In today’s changing work environment, a one-size-fits-all policy does not make sense. As companies embrace remote working, travel, and expense policies need to be more adaptable to cater to employees purchasing video conferencing licenses, home office equipment, and productivity software.

Likewise, no two corporate travel and expenses policies are the same, and using AI to automate travel and expense management means enterprise finance teams can configure systems to automate their specific travel and expenses policies, risk assessments, and approvals processes, to reflect their own precise needs.

Conclusion

Spend management has become more complex, making the need for data-driven systems that provide automation, visibility, and control over expenditure more important than ever. An AI-based system means organizations rely less on an auditor’s luck in catching expenses abuses, and more on a systematic, evidence-based, and consistently fair approach.

When implemented correctly, the result is a well-defined and efficient travel and entertainment expense system that sets clear expectations for employees, reduces fraud, and provides up-to-date spend data to improve financial management and decision making. Particularly in the face of today’s rapid pace of change, AI-powered expense management automation vitally free finance leaders and their teams from manual, labor-intensive processes and help ensure that they can instead focus their time on the strategic concerns that matter most.

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Andrew Foster is the VP Consulting at AppZen