How can accounting software help small business?
Business must be lean and financially sustainable to survive through the current business climate. Small businesses with large overheads and complex financing structures should work on re-organising the business to regain control of their long term economic futures. Now is not the time for reckless investment in the pursuit of growth that only adds increased debt and inflexibly that could ultimately lead to the businesses downfall. Now is the time for prudence and tight financial management that allows a business to be financially independent. Accounting software can be central to supporting small businesses become financially independent and below investigates how.
1) Complete focus on cash flow
A business owner should be 100% focussed on the financial health of their business. This means having a thorough understanding of the businesses cash flow position. There is nothing more important in a small business than its cash flow position and as result should be very tightly managed. One of the difficulties for small businesses keeping on top of cash flow is the organisation of receipts and invoices. An accounting software package easily compiles all of the relevant financial information and presents easy to understand dashboards and reports of company performance. Once provided with the required knowledge of the company’s performance appropriate action can be taken to improve the company’s performance.
2) Focus on customer satisfaction
In times of economic hardship competition is notably increased in every sense. As customers are more considered with their buying decisions small businesses need to ensure that every aspect of their proposition is appealing to the customer. Margins are widely squeezed across all industries in the hope of enticing hard-up customers and therefore the only real differentiator to attract business is customer service. An accounting software package does not only improve business productively it also helps structure all customers and suppliers into an easy to manage database. This structured knowledge allows staff to provide a more tailored service to clients.
3) Look for ways to cut costs
In this economic climate any investment that doesn’t directly add value to the top line should be cut. Accounts Payable features with an accounting software package detail every penny that is spent in the business. This allows a thorough review of expenditure to take place to ensure that savings can be made where appropriate. For example costs could be cut down on paper, postage, transitioning to direct debit payroll. These cost cuts would allow the business to reduce its operating cost without cutting expenditure that generates income into the business.
4) Consolidate Suppliers
Businesses can also use accounts payable features within their accounting software package to streamline its supply chain. Many businesses needlessly have similar supplies from a range of suppliers. Buying in bulk is always a more economical way of doing business. Condensing suppliers with larger orders is more commercially viable in reducing supply costs. Generating reports by independent supplier will provide valuable information regarding the profitability of each supplier contract.
5) Negotiate better rates with long standing suppliers
In addition to the consolidation of the supply chain there may also be an opportunity to renegotiate rates with long standing suppliers. The longer the relationship between a business and a supplier the more appropriate it would be that the business qualifies for a rate that reflects the loyalty of the relationship. Reducing the costs of the supply chain can make a significant and welcome difference to a small business P&L during tough recession times.
6) Continuously look for ways to reduce non value adding admin work
In any small business the time of employees is one the company’s biggest assets and therefore spending time on non-value adding activity should be minimised wherever possible. An accounting software package ensures that people are not tied up managing basic bookkeeping tasks and completing quarterly and end year financial reports. Managing a business’s financial affairs can be very admin heavy if not managed in the correct manner. Having efficient software to automate these admin tasks allows staff to focus their attention on growing the business and generating income.
7) Streamline payroll and human resource management
As already discussed people are a huge asset in any small business. An accounting software system can help provide detailed information around staff costs in addition to hours worked and absence information. Having detailed information about staff costs allows a business to more accurately plan for the future and correctly budget for human resources. Also from a financial perspective large fines are imposed on businesses that make mistakes on Tax and National Insurance contributions. Having automated software negates the risk of mistakes occurring at a time when fines cannot be afforded to be taken.