The world can be a tough place for a small business with regular turmoil in recent years. Having successfully adjusted to the new norm – primarily eCommerce sales channels for convenience and safety – it is time to prepare for the future. Financial accounting and budgeting are essential for every business, including sole traders. If the past few years have taught us anything, it is that businesses of all sizes must be ready to adapt.
All indicators point to technology. Small business owners will be forgiven for thinking tech is only for large enterprises with big budgets. Actually, the opposite is true. Small businesses are well-placed to see a rapid return from technology investments. Compared to their larger, often sluggish counterparts, small businesses can implement new technologies and processes quickly, with little disruption.
71% of growing SMEs attribute their survival to digitisation and 62% confirm businesses using technology from just 10 years ago could not have survived the effects of the pandemic (source: smallbusiness.co.uk). Technology is now widely recognised as an enabler to survive adversity. Technology helps a business improve service delivery and operational efficiency, both of which are good for customer and employee retention.
Where to start? At the heart of every successful business is adaptability. To help steer your business in the right direction, here are 5 tips for financial accounting and budgeting for small business. Be ready to scale in a data driven world brimming with opportunities and challenges.
1. Take Control with Increased Visibility
Visibility of finances is crucial. Planning and forecasting are nigh on impossible without a comprehensive source of data from which to derive insights. Data is essential to identify patterns and trends, which form the foundation of every robust business plan.
A fit-for-purpose business system in a data driven world should leave no ‘gaps’ in terms of functionality. The user interface, or dashboard, should provide visibility of financial health, in real-time.
ERP software systems for instance, are configurable to individual user needs. This provides automated reporting and alerts customised to individual roles, departments, and business functions. With this top-level visibility, leaders have greater control, and ability to steer a business in the right direction.
2. Improve Accuracy
Investing resources in financial accounting will be undermined if the data used is flawed. Legacy software systems are often the root cause of inaccurate business data. It is common for businesses to accumulate a patchwork of unconnected software systems. When it comes to financial close, reconciling multiple data sources is a cause of inaccuracy. Ensuring collated data is accurate can become an all-consuming process for the finance team and department managers.
For a small business, reconciling data sources might not be a headache right now. However, as a business grows, disparate data sources often become a barrier. Over time, financial planning via multiple data sources becomes increasingly complex. Growing numbers of employees working with disparate software systems will have an adverse effect on productivity and most likely, employee and customer retention.
With all stakeholders ‘on the same page’, decision making is better aligned with business objectives. Managers can all see the same ‘big picture’ and drill into the same data set. For example, both finance and sales will receive an alert when an invoice becomes overdue and take appropriate action.
A collaborative approach to financial planning aligns individual departments with overarching business objectives. Strategic sales and marketing plans for example, can be linked to short- and long-term financial objectives. Reporting can be configured to monitor both department level and company-wide performance.
The ability to utilise predictive tools in financial planning allows a business to run multiple scenarios which can be assessed collaboratively before a decision is made. A feature of today’s business finance software, scenario running is a valuable tool for top-level management, to consider different approaches to navigating challenges and seizing potential opportunities.
4. Monitor Performance
Access to real-time data facilitates performance tracking to continually evolve forecasts and plans. As trading conditions change, for better or worse, and industry trends develop, real-time visibility of performance enhances agility. Whether an opportunity to enter a new market, exploit a gap or niche presents itself, or a potential threat arises, visibility through real-time data supports a proactive approach to business planning, rather than reactive.
Monitoring performance via forecast and actual data also benefits resource planning. Predicting future skills requirements ensures staffing levels can be aligned with objectives at the right time, without exceeding budget. Payroll and HR data integrated with the core finance software system allows a business to model and plan without having to rekey or rebuild data sets.
5. Ready to Scale
Today, business is data driven. There’s no getting away from it so, be prepared. Myriad scenarios could, and likely will arise, where outdated legacy systems and disconnected software acts as a barrier to growth. Transaction volume limit or eCommerce and EPOS software disconnected from the core business finance software system for example, are common barriers to growth in the retail sector.
Once a business management system has started to ‘creak’ and show its limitations, business growth is likely to already have been restricted. It is prudent to future-proof business technology from the outset rather than wait until opportunities are out of reach.
Read real-life examples of how forward-thinking start-ups and small businesses have used integrated financial accounting software to realise their growth ambitions: