Good to Great: How to Scale With an Outsourced CFO

Running a small business can feel like running a small country. You have so many different issues to manage and so little time. And because you’re operating with small numbers, your financial situation can feel tenuous periodically, adding to your stress.

In this post, we’ll look at the top six financial challenges faced by small business owners. Each of these challenges can loom large enough to become a severe problem. But the good news is that each issue has specific solutions that you can implement in your organisation.

 

1 - Access to Funding

How many times have you heard this one: “You have to spend money to make money.” That saying has been passed down through the generations, and it has sometimes led small business owners astray.

According to Visual Capitalist, 29 percent of businesses fail because they run out of cash. Their sales struggle to keep pace with their expenses, and they run into the ground. Clearly, funding is essential for long-term success, but not all funding works equally well.

As a business owner, you have many important decisions to make, and choosing the right funding is crucial. As you evaluate your options, don’t forget to look at each of these:

• Small business bank loans
• Venture capital firms
• Small business grants
• Individual investors
• Strategic asset financing

 

Some of these funding mechanisms will work better than others for your unique situation. Choosing wisely is key. Talk with your business advisor about the pros and cons of each funding resource and how it would mesh with your structure, goals and business plan.

As a general rule – you try to match your funding type to the length of the project you need the funding for, i.e. long term finance for long term goals.

 

2 - Debt Repayment

Many business owners take on debt to launch their businesses. And at the beginning of any new business venture, it’s impossible to know with certainty how the company will perform.

That’s why small business owners often struggle with debt repayments. It takes time to work up to a healthy income, and in the meantime, you have employees and suppliers to pay. If you’re struggling to pay your debts, talk to us about debt consolidation and other strategies to get you back on track.

 

3 - Inconsistent Cash Flow

Consistent cash flow should be a top priority for small businesses. Without cash on hand, you can’t pay your employees, bills or suppliers. All too often, a single bad month can send a company’s cash flow spiralling out of control, and it can take half a year or more to regain stability.

Fortunately, there are many strategies you can implement to fix inconsistent cash flow and make your cash work for you:

• Prepare and maintain a cash flow forecast
• Establish clear payment terms
• Invoice right away
• Offer periodic payment packages
• Make payment easy for your clients
• Minimise your debtor days
• Focus on cash flow, not profits
• Look at the big picture
• Outsource CFO services

 

4 - Emergency Expenditures

An out-of-the-blue expense can throw your forecasts out the window and send your cash flow reeling. Sometimes these surprises come in the form of an unexpected tax bill. Other times, an expensive piece of equipment breaks down, or an accident incurs colossal repair bills.

Some of these surprises might be anticipated through careful planning and budget forecasting. Others may be completely unexpected. Look for ways to minimise your risk by acquiring adequate insurance and creating a cash buffer for emergencies.

 

5 - Reporting

Small business owners wear so many different hats. You interface with clients, work on marketing, track the bookkeeping and deal with personnel issues. It takes so much time and effort just to keep day-to-day operations flowing smoothly that reporting can fall by the wayside.

Neglecting to report can lead to financial losses, especially if you end up facing fines for missing deadlines. If you struggle to stay on top of reporting details, consider outsourcing them so you can put your mind at ease and rely on others’ expert skills.

 

6 - Taxes

Getting taxation basics right has never been more critical. The ATO is getting smarter with its data, and it’s following up with businesses and individuals who make mistakes on their taxes. That’s why it’s so important to ensure proper record keeping, correct account codes, substantiation and precise accounting for all cash transactions.

Don’t forget about your Fringe Benefits Tax (FBT) return, which is due in May. Talk with your business advisor about ways to reduce FBT by using the 50:50 Split Method or the Actual Cost Method.

We’re here to help you face any financial challenges that threaten your small business. Whether you want to consult with one of our experts or hire out specific services, we’re here to help. Get in touch with us to learn more.