Top Tips for SMB’s to better manage cash and avoid common financial pitfalls

With 39% of SMBs in Europe and 46% in the US agreeing that their organization as a whole should take responsibility for their company’s finances, is it possible that important financial tasks are being increasingly delegated and slipping through the cracks?

At a time when 51% of SMB owners in Europe and 61% in the US list finding new markets and customers as their greatest priorities in the market, it becomes increasingly important that organizations are able to ensure that the processes and procedures in their finance function are a tool for growth rather than a prohibiting factor, according to Basware’s SMB Finance research.

Given the relative size of SMBs in relation to larger corporate customers, the healthiness of cashflow is vital if these organizations are to stay afloat and transact effectively.

Basware’s SMB Finance research surveyed 558 business owners and 1,368 employees with financial responsibility within small to medium enterprises. Here we share key insight from the research, and take a look at the measures that SMBs can take to ensure that their cashflow is a weapon rather than a hindrance in the tough economic climate:

1. Learn from the businesses you transact with: The research found that, while medium-size businesses are most likely to receive an electronic invoice from their supplier, this type of business is also most likely to experience challenges with purchase invoices (91%, compared to 84% in small and 53% in micro organizations). As SMBs become larger and implement more automated processes, they continue to deal with smaller organizations with manual paper processes. This indicates that micro organizations might benefit from improving supplier relations, and therefore cashflow, if they are able to transact in the same format as their fellow companies.

2. Decentralize control to ensure timely payments: While senior managers are often the ones tasked with taking control of finances, this might be one smaller component of their wider role within the company. This can mean that tasks such as approving financial expenditure and invoices are often delayed. Provided that SMBs are able to educate employees about the necessary processes involved, the idea of decentralizing the approval of invoices makes a great deal of sense to ensure that cashflow is working effectively.

3. Training is imperative: Basware’s SMB Finance research revealed that 1 in 3 senior managers are unprepared for the financial role that is expected of them. Somewhat tellingly, it was also found that 45% of senior managers have yet to receive formal financial training. It comes as no surprise that financial responsibility, coupled with a lack of training, is meaning those employees higher up the ladder are struggling to fulfill their role. By ensuring that the necessary employees have the expertise in financial processes, legislation and strategy, the organization as a whole will benefit from the appropriate financial support.

4. Take a holistic approach to finances: SMB owners should consider whether it is possible to expand the number of employees that engage with company finances. If more employees are able to engage with basic financial processes and tasks, this could prove beneficial in terms of ensuring that financial activity such as cashflow is appropriately attended to, easing the burden on senior managers. One strategy could be to move from more laborious paper-based systems to automated finance systems. This could help employees to complete financial tasks in a standardized and time-effective way.

The transparency of finances provided by invoice automation systems means that buyer organizations using such solutions will have better visibility of cashflow, avoiding cashflow ‘myopia’ – cash being tied up in limbo. It provides a consistent and convenient format for the buying organization to process incoming invoices, therefore minimizing this problem of delayed payments and maximize the opportunity of companies getting what they are owed sooner rather than later. So if you’re an SMB with expansion on your mind, think about your own current financial processes for a moment. Are you preparing yourself properly to ensure the brakes don’t go on your journey to profitable growth?

Category: Market trends