How can Your SME Manage its Budget More Effectively?

How can Your SME Manage its Budget More Effectively?

You have the spreadsheets, the software and the company credit cards, and you feel like you’re doing a pretty good job of keeping your spending to a minimum. But, are you sure your SME is actually managing the budget as effectively as it could be? There are many things you can do to improve and make the most of various aspects of your business’s spending – check out these ideas below to see what you might implement in your SME.

Set targets for cash flow

Many SMEs set quarterly or monthly targets but, while this is certainly a step in the right direction, you should take it a step further. Start setting your SME weekly targets so you have a very accurate outlook on the funds you have available at any given time. This is the only way to ensure you’re giving cash flow the attention it deserves and breaking it down into weekly segments like this will ensure you’re always make astute decisions with your spending. If nothing else, you’ll get a real buzz of satisfaction when you hit your target week after week, resulting in a great year for cash flow overall.

Invoice as soon as possible

Invoicing is a key part of managing your budget, so consider refining your invoicing process to make it more likely that you’re going to be paid on time. For example, send your invoices as soon as the work has been completed rather than delaying. This way, you’ll shave off the extra days and weeks it’s going to take to get paid. You can also use invoice management software to help keep track of what needs sending and what needs chasing, and do consider adding a delayed payment charge to your invoices to ensure that ‘repeat offenders’ don’t continually fail to pay you on time.

Make your payment terms crystal clear

Next up, it’s critical that your clients understand your payment terms. So, rather than expecting that everyone subscribes to the same 30-day invoicing period, make sure you outline your payment terms as soon as a new client comes on board. This might mean refining your on-boarding process, or having a refresher meeting with an existing client. It’s never easy to talk ‘money’ with your clients, but it’s a sure-fire way of managing your budget more effectively; after all, you won’t be able to manage your budget if you can’t be certain of what’s overdue at any one time.

Keep a close eye on payroll

For many SMEs, their largest outlay is the salaries they pay their workers, so it makes sense to improve your budgeting in this area too. Use forecasting tools to help decide when it’s the right time to hire new recruits (rather than hiring too few and it impacting on quality, or hiring too many and it impacting on your bottom line), and use voucher checks and payroll management software to ensure you’re not making any mistakes when you’re paying out salaries.

Focus on cash flow

Finally, when it comes to managing your budget more effectively, remember that ‘cash is king’. Many SMEs focus on profit margins, and while that’s not a bad thing in itself, focusing on it to the detriment of cash flow is a recipe for disaster. You must have available cash at all times if you want your business to stay afloat, and the fact of the matter is your profit will be in order if your cash flow is first.