It’s not just individuals who should take time to reflect and make resolutions for the year ahead. New Year’s should also be resolution time for SMEs, a sector that plays a huge role in the Australian economy and employs almost half of the country’s 10.7 million workforce.
There are three resolutions that SME owners and directors can initiate that could really make a difference to their business’ bottom line, and to its longevity.
Resolution 1: Pay more attention to cash flow management
In the most recent Scottish Pacific SME Growth Index, a poll of 1,200 business owners, cash flow was the top concern keeping them up at night. As such, a useful resolution would be to improve cash management.
This time of year can be tricky for many SMEs because of the annual post-Christmas cash flow dip. This can make it hard to meet outstanding liabilities on time, which can create issues for even strong, viable businesses around end-of-February Business Activity Statement payment time.
Many small business owners are entrepreneurs who like to focus on exciting business ideas – which can mean they might not prioritise spending time on the 'boring stuff' around systems improvement.
However, January is an opportune time to do the financial housekeeping and put more robust systems in place. Take some time to improve your invoicing process, to reduce the potential for disputes and improve on late payment rates.
It may only take a couple of minor adjustments to really speed up the collection cycle, bringing more cash into your business.
Resolution 2: Don't be afraid to try new things if your working capital options aren’t working
The Scottish Pacific SME Growth Index found that very few business owners regularly review their finances – only 4.8 per cent actively keep an eye out for credit facilities that best fit their business, and half never get around to reviewing their primary bank relationship.
With this in mind, January is a great time to consider what working capital options are best for the business, and will enable it to grow with peace of mind.
For owners of high-growth businesses who don’t want to tie the funding of this growth to their own property, a good option could be debtor finance, a funding solution that grows in line with business revenue and which doesn’t require the family home as security.
Debtor finance is particularly helpful to labour-intensive businesses where wages must be met, often long before the business is paid.
Resolution 3: Find the roses, and stop to smell them
Almost 90 per cent of SME owners surveyed by Scottish Pacific work 50-plus hours a week in their business, with 43.7 per cent toiling for 60 to 80 hours (the equivalent of a 12-plus hour day, six days a week).
Long hours go into running a small business, and the 24/7 nature of digital technology means that business owners are always accessible. At this time of the year, it’s worth making time for a mental health check and making resolutions that work on an individual level to help achieve a better work-life balance.
This means not only taking time off to refresh for the year ahead, but building into your weekly calendar non-work meetings, events or activities that give you a break and bring you pleasure, so that you have more energy in the time you do spend in the business.
Wayne Smith is the head of debtor finance at Scottish Pacific.