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According to the Business Partners Limited quarterly SME Index, two of the top three challenges that small businesses face consistently relate to the economics of doing business. Managing cashflow is one of the leading make-or-break factors that influence whether small and medium-sized enterprises (SME) are able to overcome the hurdles of their start-up years to grow into sustainable businesses over the long term.

And while it is not necessary for small business owners to be qualified financial practitioners, a reasonable degree of financial acumen is essential. It is particularly important for SME owners to be uncompromisingly diligent with their financial management during a global economic downturn.

The following three quick fixes are practical ways that small businesses can apply to improve their financial management:

Leverage digital tools

The digital age has led to the proliferation of digital tools that are geared towards meeting the needs of small businesses. There are a number of financial tools that are available for free or for a nominal fee.

Online accounting tool, Xero is a great example. Using Xero, you can automate several elements of accounting and reporting, including invoicing, payments and customer management.

Another great example is QuickBooks – a bookkeeping app that allows SMEs to process transactions in multiple currencies and access features like expense tracking, as well as inventory and cashflow management.

By using digital tools such as these, SME owners can free up time to focus on other aspects of financial management and ask important questions like: what is the business spending money on? How can expenses be reduced? Which lines of income does the business rely on, and can these be diversified? Are the business’s current financial reports accurate? These are the aspects of financial management that SME owners need to have in-depth knowledge on in order to make informed business strategy decisions.

Talk to a financial advisor

As an SME owner, you may believe that you know and understand your business intimately and have identified the current and potential hurdles. However, there is immense value to be derived from obtaining an expert, outside opinion.

A financial advisor can provide you with their perspective on whether your current business model is financially viable and whether your personal financial decisions are conducive to the health of your business. They can also advise on any available tax benefits that you can capitalise on and if your operational costs align with your growth strategy.

Optimise your marketing spend

One of the most significant investments you’ll make as an SME owner, especially during your initial years, will be in marketing your business. This includes your financial investment, but also your investment in terms of time and resources.

A common pitfall among entrepreneurs is not using analytical data to track return-on-investment. Having access to this data ensures that you spend your marketing budget in the most efficient way and on the right platforms to reach your audience.

Social media platforms as well as a range of advertising tools like Google Ads have analytics functions that will help you determine the success of your campaigns and whether you are targeting the right audience with your content. Marketing has come a long way since the days when businesses resorted to the “spray and pray” method of marketing. With analytics tools, you have the ability to target your marketing efforts down to the finest demographic data point and use the results of your campaigns to inform your strategy and ultimately, save on the cost of marketing.

An investment into honing your financial management skills is never money or time wasted. As an entrepreneur, becoming more financially literate should be a top priority and will have far-reaching implications for your venture and its ability to thrive in today’s highly competitive market.

About the Author: Ben Bierman

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Ben Bierman has been our Managing Director since 2015. He joined our company in 1990 and has risen through the ranks occupying various positions ranging from being a management accountant, Head of Information Technology and Chief Financial Officer. Ben is an avid reader, enjoys classical music and being in the outdoors including for hunting trips. He is our go-to-spokesperson for our SME Confidence Index, SME sector policy and trend matters, and business leadership articles.