10 Financial Management Tips for a Growing Business

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How to Start Using Financial Management Practices in Your Business

The growth phase of a business is an exhilarating and hectic time for an entrepreneur. There are people to recruit, products and services to launch, and marketing campaigns to be organized. With so much going on, financial management might not receive the attention it deserves. However, tight expenditure controls will ensure operational costs don’t exceed the budget. And the accounting and financial systems and controls put in place now will serve the business well into the future.

1. Create a Budget and Cash Flow Forecast

Summarized forecasts will undoubtedly have been created along with the initial business plan. However, more detailed budgets and cash flow forecasts will be needed during the start-up phase. The original estimates will need modifying, and the timing of the business launch may change. Consequently, it is best to revise the budget and forecast when changes are identified to ensure that costs are controlled and overall plans stay on track.

2. Maintain a Cash Reserve

Nothing is certain in business, even more so in a start-up. For example, a handful of late-paying customers can considerably impact the cash flow. Or, an unexpected downturn in the economy could impact sales. A cash reserve will provide a cushion against such unforeseen events or, at least, buy time while the company repositions itself.

Related: What Are the Best Ways to Improve Cash Flow for Your Business?

3. Define Purchasing Controls

If multiple people are involved in the start-up, it would be best to define purchasing controls from the outset. For example, setting authorization limits for purchase orders and giving individuals specific areas of budget responsibility.

Adequate purchasing controls, along with financial reporting, will help to avoid overspends. Purchasing controls will also prevent mishaps, such as two people ordering the same item.

4. Look for Savings on Every Purchase

With funding in place, it can seem that an endless pot of money is available. Consequently, value for money may not always be prioritized in purchasing decisions. It would be best to get several quotes and negotiate the price on all significant purchases. After all, the objective is not to spend all the business capital with the goal to create a surplus of funds.

5. Monitor Expenditure and Timeline

Pre-launch and post-launch, it is essential that a start-up monitor costs and where it is against the projected timeline. The initial budget will need amending if the launch is delayed or sales take longer than expected to materialize. Under these circumstances, monthly expenditure may be within the budgeted figures. Nevertheless, a delay in breaking even will result in a more extended period of losses, draining initial start-up capital.

6. Keep Overheads Low

Sales forecasts will be less dependable during a growth phase. It is best not to commit to fixed overheads based on the assumption that sales will continue at the high rate of growth. Instead, opt for flexible, scalable contracts that can be scaled back if necessary. For example, use flexible serviced office space instead of committing to a long-term office rental and the associated staff and overheads.

Related: How to Cut Business Costs

7. Develop Robust Internal Systems

Developing detailed internal procedures while there are only a handful of employees and customers may seem premature. However, a small business is in an ideal position to implement robust systems while turnover is relatively low. For example, documented credit control and collection procedures will ensure timely payment of invoices whether there are ten or one thousand customers. And company handbooks, hiring guidelines, and disciplinary procedures will be needed when more employees are on board.

Related: 10 Tips for Determining B2B Customer Credit Terms

8. Implement a Scalable Accounting Software Package

It is advisable to purchase and set up accounting software as soon as funding is in place and purchasing begins. And the software should be scalable and configured to account for the growth phase. Buying an accounting software package will enable proper control over start-up costs and avoid a backlog of transactions developing that will need posting later.

9. Look to the Future

Decisions made during the growth phase may have longer-term financial implications. For example, an investment in a marketing demand may create demand that cannot be met. Taking on employees in a busy period may not be sustainable if sales volume reduces. So, it is advisable to project the impact of decisions in a long-term forecast. And always factor what-if scenarios into the decision-making process.

10. Consider Financing Options for Growth

Growth requires additional working capital, which may need financing. Long-term forecasting will indicate if there will be a need for such additional funding. New investment, bank loans, or sales invoice factoring might raise the working capital injection. Either way, planning growth financing and exploring the various funding options before the need arises is advisable.

Related: Invoice Factoring vs. Business Line of Credit

The Bottom Line

Sound financial management is a must for a business of any size. Getting the systems and controls in place from day one is advisable. It’s always best to plan for the future, including outcomes less favorable than anticipated by keeping fixed costs low, maintaining a cash reserve, forecasting funding requirements, and considering the long-term implications of decisions.

Whether your business is thriving and you can’t keep up, or you are waiting on clients to pay, Universal Funding can help your growing company. Call us at 800.405.6035 or complete our rate form today to learn more about invoice factoring and how it can improve your company’s cash flow.

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Whether your business is thriving and you can’t keep up, or you are waiting on clients to pay, Universal Funding can help your growing company. Call us at 800.405.6035 or complete our rate form today to learn more about invoice factoring and how it can improve your company’s cash flow.

About Universal Funding

Universal Funding is a nationwide invoice factoring solutions leader, supporting growth-focused businesses with scalable factoring solutions. With its invoice factoring, payroll funding, and purchase order financing services, Universal Funding provides clients with the working capital needed to grow and support their businesses without taking on new debt. Ranked as one of the nation’s top invoice factoring companies, Universal Funding provides cash flow financing for businesses all across the United States.