3 small business finance best practices

A small business can quickly get caught up in a whirlwind of paperwork and financial figures, especially if the company in question is successful. While embracing the modest victories is one thing, the most fruitful enterprises will ensure that the facts surrounding company capital are consistently kept in check.

So, what are the best practices when it comes to small business finance?

Well, research from Certified Practicing Accountants Australia (CPA) has pointed to a few things that all business owners should keep in mind:

Utilise financial software

There are a whole host of software packages available that can make life easier for small businesses. The best will include features that provide vast swathes of financial reports and statements in an accurate and timely fashion.

Many solutions are not especially expensive and will quickly earn back any initial outlay thanks to their usefulness. Moreover, financial software is a great way to create a link between the business and its accountant. 

Rather than collate everything manually, all of the applicable bookkeeping and accounting information can be passed on at the push of a button. 

Assess working capital

While profits will typically be the barometer of success, they are not possible without steady working capital. Small business owners need to assess their's regularly, ensuring that finances aren't wasted in crucial areas.

For example, carrying out regular inventory checks and, perhaps more importantly, writing off any stagnant stock is crucial in limiting over-spending. 

Research from PricewaterhouseCoopers (PwC) has pointed out that focussing on working capital is a key driver of wider profitability, with the most successful companies constantly assessing themselves and adapting to financial change.

Set targets and plan 

While no business, regardless of its size, can be certain what the future holds, incorporating some form of strategic planning into company practices can help smooth any potential bumps in the road.

In terms of finance, setting targets and then having a roadmap in place to meet them is a must. Collect internal data, carry out statistical analysis and identify any key performance drivers. Once all of the facts and figures have been established, it should become a little clearer as to where the company has room for improvement.

Ultimately, the best plans will be relatively fluid and adaptable. However, basing any decisions around a core set of company values, and backing them up with the applicable data, can be the most fruitful method of small business financial planning.