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For small and medium-sized businesses (SMBs), managing finances during the early growth stages can be fraught with challenges. From cash flow issues to complex reporting requirements, SMBs and their leaders often face financial hurdles that they’re not equipped to handle as new challenges arise with growth. In this article, we discuss the common financial pains that growing SMBs experience and provide actionable solutions to maximise growth opportunities.
Common Financial Pains SMBs Experience
Cash Flow Management: Maintaining sufficient cash flow for daily operations and funding growth initiatives is a struggle. Without real-time financial insights, it's difficult to monitor cash flow effectively. This lack of a clear financial picture makes it hard to make informed decisions about inventory, staffing, or investments. Keeping track of cash flow becomes even more complex when managing multiple revenue streams as they grow.
Financial Reporting Complexity: Navigating complex financial reporting requirements can be time-consuming and resource-intensive for small businesses. This can take away valuable time and energy that could be better spent focusing on core business activities.
Limited Strategic Financial Planning: Many SMBs lack the internal resources and financial expertise to develop and implement long-term strategic goals. Understanding financial metrics and their impact on the business goes beyond basic bookkeeping. It can be a struggle to interpret financial data, translate it into actionable insights, and use it to build robust financial models for long-term planning.
Transforming Challenges into Opportunities
Addressing financial challenges effectively can transform them into opportunities for growth. But what actionable strategies are available to company leaders looking to level up their financial knowledge to the benefit of their growing business?
Build a Strategic Finance Foundation
Company leaders can enhance their financial literacy by investing time into improving their financial knowledge. Take an online course or attend complimentary webinars to understand key financial metrics, gain expert advice and explore other topics designed to support growing businesses in the UK and overseas. Consider allocating time to creating a financial plan, even if it's a basic one. Start by forecasting future revenue and expenses based on historical data and look to identify potential funding gaps in the short and long term.
Leverage Technology & Automation
There is a wealth of cloud-based finance and accounting software available to growing SMBs. Speak to other founders and company leaders to discover user-friendly platforms that automate time-consuming tasks like bookkeeping and provide you with real-time financial data for a clearer picture of your company’s health. Reporting tools can generate custom reports tailored to your specific need, allowing you to easily track key metrics and identify financial trends.
Be Proactive
Scheduling regular internal reviews of your financial performance can be an invaluable exercise. Take the time to analyse financial statements, track KPIs (Key Performance Indicators) and identify areas for improvement across your business. Furthermore, conduct a SWOT analysis to identify strengths, weaknesses, opportunities and threats to your business. Scenario planning exercises can help you assess how your business might respond to different market conditions. This proactive approach can enable you to anticipate otherwise unforeseen circumstances and develop necessary contingency plans.
Seek External Expertise
External finance functions can support your existing finance department by plugging knowledge gaps, educating your team through a collaborative partnership, and providing real-time insights and actionable strategies that were not before readily available. If your SMB is experiencing or planning rapid growth for the first time, perhaps you’re yet to establish an internal finance department. In this scenario, company leaders are often left spinning too many plates; feeling anxious that some departments aren’t getting the expert attention needed to achieve sustainable business growth. Looking to external support doesn’t mean you’ve failed; this agility can help to ensure that all key business functions gain the attention to detail, and resources needed to maintain a competitive advantage.
Transform Your SMB's Financial Future
Financial challenges are inevitable, but they don't have to be insurmountable. SMBs can transform common industry pains into viable growth opportunities, paving the way for sustainable success.
If your business is experiencing financial challenges and you’re feeling at a loss, reach out to our dedicated team at Addition Finance. We empower SMBs through expert financial planning and support and provide access to our revolutionary finance platform that enables companies to succeed, regardless of size or resource.
