There are a number of circumstances that distinguish the failure or success of an SME during its first year. Many small and medium-sized businesses close in the first months of their journey due to a lack of adequate planning in the areas related to commercial or financial management. Both in the launch and expansion stages, managers must bear in mind that their survival depends to a large extent on the effectiveness and control of all accounting. Randall Castillo Ortega, the founder of SME lender RACO Investment, offers tips that will allow entrepreneurs to keep their SME afloat after its first year.
The control of income and expenses, invoicing or any other matter relating to the finances of your company should become a priority from the moment you open the doors of your business. “One of the ways to improve the collection system is to offer your customers incentives, such as discounts, for making payments in advance,” explains Castillo. “If your company’s main problem is that your customers are late with payments, choose to set penalties such as default interest.”
In any business, it is necessary to know the liquidity that is had at all times. The best way to know this data is to make a daily record of capital movements. If your accounting books are not up to date, it will be increasingly difficult to establish control over your company’s treasury. To know if your financial plan is being fulfilled, you will have to compare the status of your accounts in different periods of time. In this way, you will see if your strategy follows the marked path or not.
To be a good planner, you must know in detail all your inventory with an exhaustive record of all your products. This way you will know which ones sell better and which ones take longer to go to market. With this information, you can establish strategies that allow you to maintain the pace of sales of products or services of high turnover and improve or accelerate the exit of those that take longer to reach your customer.
Austerity will prevent you from wasting your capital on the purchase of services or products unnecessary for the proper development of the productive process of your company. Buy only the raw material you really need to trade.
The advance of invoices is a good alternative to get immediate financing. It consists of assigning the rights of an outstanding invoice to a third party to obtain liquidity.
Set controls to make sure your growth plan progresses are done as planned. If your goal is to increase sales, you can set milestones on certain dates to check if they are being met and if corrections are necessary.
Sooner or later, your company will need to grow and it is best to plan that growth as soon as possible to avoid obstacles or problems. Be clear about all the steps to follow and focus on seeing how your business increases for the future.
In the market, there are numerous programs that will allow you to keep the accounting of your company effectively. Set 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.
An accounting advisor can help you manage your company’s finances in the most delicate stages of your business. It will be an additional expense, but it will help you avoid mistakes with the Treasury or Social Security, keep a more realistic control of your business plan and even 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 can give you the key to how to do it.
