Finance tips for small business

Business Toolbox: Finance

Business toolbox: finance tips for electrical contractor businesses

As a small business, it’s essential you pay as much attention to the finances as you do to the tools. Here, our experts answer questions posed by electrical contractors, just like you.

In this Article:
Managing finances is key for any business
We put your questions to our experts
Got a question to pose? Send them in and we’ll get answers!

Our Finance expert:

Sarah Eifermann, Commercial lending and asset finance specialist


Q: When is a good time to take out finance to support business growth?

Sarah Eifermann, commercial lending and asset finance specialist, says:

Most commonly, business growth slaps you in the face! It’s not planned and comes as a result of a large contract or new opportunity unexpectedly coming your way.
The initial decision to push ahead is then met with a scramble to ensure you have the right systems and processes in place, including finance, to enable the transaction.
So, when is a good time to take out the finance needed to support business growth? Well, in short, it’s well before you need it. Yet that’s a chicken or egg argument then, isn’t it?!

Actually, no!

With careful expansion planning via business goals and targets, business finance is much easier to facilitate, as knowing you are planning to obtain it changes the way you make decisions regarding your financials in the lead-up to the application.

This usually means more lender options and loans available to you as you are more prepared, and can be seen as more profitable on paper.

The next best time is right at the moment that you realise you’ll need funding, and not a moment later. Even waiting a week can create headaches in achieving your business growth goals, as this type of finance is usually a complicated and lengthy process.

We often recommend that our clients have a facility set up and ready to go in advance so that if an opportunity comes knocking, they can act immediately and reap the rewards for their business.

* Please remember, this advice does not take into account your personal or business circumstances, is general in nature, and is provided for information purposes only. Please seek professional financial advice that’s tailored to your circumstances if you need it.

Our Finance expert:

Adam Espie, Chartered Accountant and Director at Shoreline Advisory


Q: How can we improve cash flow management within our business?

Adam Espie, Chartered Accountant and Director at Shoreline Advisory, says:

We find most businesses we work with can be better at cash flow management, which can sometimes be an afterthought, particularly for small businesses without internal finance teams. Great cash flow managers typically implement some of the following processes.

Forecasting, forecasting, forecasting!

This is the most important aspect of effective cash flow management. Having a really sound understanding of your incomings and outgoings during a certain period is vital. Reviewing prior year bank statements and financial accounts can be a great place to start.

Get the invoices out

Don’t sit on your invoices. The quicker they are in your customer’s or creditor’s ledger, the better. Some businesses have a rigid monthly payment cycle for creditors regardless of your terms. If you miss the deadline, you could be left waiting another month.

Effective financing

Explore the option of financing new asset purchases instead of buying them outright. This can ease the upfront financial burden of a large outgoing.

Have a buffer

Good cash flow management also includes making sure there is contingency cash for unexpected outgoings. This doesn’t always have to be cash savings – speak to your bank about having access to an overdraft facility.

Work with your accountant

Whether it be your internal finance team or external accountants, make use of the experts. They can help with the analysis of the data and should be able to demonstrate how your existing accounting software can aid cash flow management.

Incorporating some of these practices can really help to proactively manage cash flow and ensure the financial stability of your business.

* Please remember, this advice does not take into account your personal or business circumstances, is general in nature, and is provided for information purposes only. Please seek professional financial advice that’s tailored to your circumstances if you need it.

 

 

 

Got a question for our experts? Email editor@gemcell.com.au

 

 

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