Here's how business owners can meet their business goals in 12 months
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While June is an opportune time to organise and evaluate the end of financial year, it is also a perfect moment to think about how to kick off the new financial year on the right track.
“As the new financial year starts, I’d encourage business owners to make the time to carefully assess your cash position,” Scottish Pacific CEO Peter Langham said in a statement.
“Outline your business goals for the next 12 months and take a good look at whether you have the right funding in place to meet those goals, because cash flow struggles can be one of the biggest killers in the SME sector.”
Scottish Pacific, an independent funder of SMEs for over 30 years, offers business owners a checklist to help them meet these goals.
Checklist 1: Review your business
Taking the time to review where one’s business is today and where it should go in the coming 12 months is important and can reap rewards, according to Langham. He suggests business owners share their thoughts with friends, colleagues, and advisers to validate and improve their plans.
Checklist 2: Model your cash flows
Langham asserts that “cash is king” and “in business, it beats everything else.”
“Many successful growing businesses fail, despite growing order books and good margins. There is such a thing as “over trading”, where commitments cannot be kept up, as the cash isn’t coming in quickly enough,” Langham said.
He advises business owners to review how fast they pay suppliers and staff, and compare that to how quickly cash flows in. Doing so will ensure they have enough cash to achieve their one-year goal. A good cash flow increases a business’s purchasing power, and strengthens supplier relationships because of improved prompt payment.
Checklist 3: Review existing funding facilities
Langham encourages business owners to make sure that their current funding lines are enough and are structured in a way that can sustain upcoming requirements.
According to the Scottish Pacific SME Growth Index, very few business owners regularly evaluate their funding. Some haven’t done so for many years, which means they have no idea whether their business is getting the best deals or the right options at the moment.
Their research also reveals that business owners are increasingly turning to non-bank lenders to sustain growth. Of the SMEs that used alternatives last year, 75% turned to invoice finance.
Langham considers it unwise when business owners use long-term funding to meet short-term requirements, or vice-versa. Business owners should ensure flexible funding lines are available to meet daily expenses that move most frequently, such as wages and suppliers.
Flexible facilities that can grow with one’s business, such as trade and invoice finance, are options. If a facility doesn’t put personal assets, such as a house, at risk, it can leverage those assets to build one’s personal wealth.
Checklist 4: Take action to put the right funding in place
“Make the change today. Don’t wait until the need is already upon you or you will rush things, which can mean not being in a position to negotiate a good deal and in some cases, you may be forced to take an option that in the long-term is not good for business,” Langham said. He suggests talking to a trusted adviser (an accountant or broker) “about working capital options that actually funds business growth”.
Putting in place the right commercial framework to help one’s business to not just survive but thrive is not too difficult, Langham said. “Don’t wait until the last minute as it may be too late.”
