There are several factors that determine the failure or success of an SME during its first year of life.
Many small and medium businesses close in the first months of their journey due to lack of adequate planning in the areas related to commercial or financial management.
Both in the launch and in the expansion stage, the managers should bear in mind that their survival depends to a large extent on the effectiveness and control of all accounting.
To avoid the lack of accounting experience which might end your business, we offer you a series of tips from experienced accountants in central London that will allow you to keep your SME afloat after its first year.
7 Essential accounting strategies for SMEs
The control of income and expenses, billing or any other issue related to the finances of your company should become a priority from the moment you open the doors of your business. If you want to achieve economic efficiency, read these tips carefully.
- Improve your collection system
One of the ways to improve the collection system is to offer your customers incentives, such as discounts, for making payments in advance.
If the main problem of your company is that your customers are late with payments, choose to establish penalties such as interest for arrears.
- Daily record of capital movements
In any business, it is necessary to know its liquidity at all times. The best way to know this information is to make a daily record of capital movements. If your accounting books are not up to date, it will be more difficult to establish control over the finances of your company.
To know if your financial plan is being fulfilled you will have to compare the status of your accounts in different periods of time. This way you will see if your strategy follows the marked path or not.
- Detail your inventory
To be a good planner, you must know all your inventory in detail with an exhaustive record of all your products. In this way, you will know which ones sell better and which take longer to go out to the market. With this information, you can establish strategies that allow you to maintain the pace of sales of products or services with high turnover and improve or accelerate the departure of those which take more time to reach your customers.
- Avoid unnecessary disbursements
Austerity will prevent you from squandering your capital on the purchase of unnecessary services or products for the proper development of the productive process of your company. Buy only the raw material you really need to operate.
- Use invoice factoring for improved cash flow
The factoring or sale of invoices is a good alternative to get immediate financing. This consists of assigning the rights to a pending invoice collection to a third party, to obtain liquidity.
- Invest in the right software
There are numerous programs that will allow you to keep the accounting of your company in an efficient way. Establish your needs and choose the software that best suits them. The investment will be worth it when you see that with it you will save time and avoid problems related to lack of experience.
- Transfer the accounting of your company to experts
An accounting advisor can help you manage your company’s finances in the most delicate stages of your business. It will mean an additional expense but will help you avoid mistakes with HMRC and other agencies, to take a more realistic control of your business plan, and even to decide where to invest the resources you have. Remember that the goal is to keep your SME afloat during the first year of life and the experience of a professional accountant can give you the key to do it.