Talking Cents

The best steps to take to stay afloat in small business accounting

After some recent discussions with a small business client who was struggling to keep their cash flow in a healthy state, it dawned on me that more often than not; when small business owners start to struggle the first reaction is almost always to look at cutting costs. Whilst keeping a tight rein on the flow of funds out the door is never a bad thing, it should always be put into context. Chances are that it’s the flow of money into your account that is the real cause of your cash flow conundrums. 

Focusing on cost cutting exercises will never grow your business, it should be seen as a temporary measure to tread water until better ideas and plans for sales growth are implemented. Harnessing current and potential customers and turning them into real sales dollars is the way forward for small businesses to thrive and not just survive.

In general, businesses without a clear customer acquisition plan are the ones that fall into the trap of lacking enough sales and it’s this lack of clear vision that creates an impression on the business owner that the only way to make money is to spend less. This backward thinking leads to business owners only focusing on cutting costs and forgetting about servicing their customers and driving their team to generate new business, both from new customers as well as upselling to existing customers. 

Here are five key points to take from this lesson.

1. Cutting costs is not a bad thing and all costs should be reviewed, but this is not a long-term solution.

2. Business growth only comes from harnessing existing client base and expansion with new clients.

3. It is only uncontrolled and un-monitored growth that will result in cost blowouts.

4. Monitoring key cost centers such as job profitability and growth will always result in increased profitability.

5. Some admin costs are essential and cutting them will curtail business growth, as it will be unsupported by the admin team/function.

For more great tips on how to get the most out of your business and grow successfully contact mas accountants, your small business accounting firm.