10 Habits of Good Businesses: Strategies for SME Success

How-to Finance

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In the dynamic world of small and medium-sized enterprises (SMEs), building and sustaining a successful business requires more than just chance or luck. It’s about developing effective habits that drive growth, innovation, and customer satisfaction. In this article, we’ll explore ten key habits that distinguish good businesses in the Australian SME landscape.

1. Optimise Cash Flow without Reserves

Action: Regularly review your cash flow using tools like Fifopay to manage it effectively without needing a large cash reserve.

In the ever-changing business environment, cash flow is king. Good businesses understand that they don’t always need a substantial cash reserve to thrive. Instead, they employ smart financial management tools like Fifopay to monitor and optimise cash flow regularly. This ensures they can navigate financial challenges without the burden of massive reserves.

2. Manage All Aspects of Working Capital

Action: Understand that working capital includes accounts receivable, inventory, and accounts payable. Managing all these aspects efficiently is essential for your business.

Working capital is the lifeblood of an SME. Good businesses recognise that working capital encompasses more than just cash in the bank. It extends to accounts receivable, inventory management, and accounts payable. By efficiently managing these components, they ensure a streamlined operation that supports growth and sustainability.

3. Balance Payment Terms with Suppliers

Action: When extending payment terms with suppliers, consider how it might impact your supplier relationships. Aim for a balanced approach that maintains strong partnerships.

To optimise your supply chain further, consider embracing supply chain finance. With this approach, you gain the flexibility to pay suppliers when it aligns with your needs, and they receive payments on their preferred terms. It’s a win-win solution that enhances collaboration across the supply chain.

4. Manage Sales Growth Proactively

Action: As you aim to increase sales revenue, proactively manage expenses and collections to prevent cash flow strain.

Sales growth is a common goal, but it can strain cash flow if not managed properly. Good businesses take a proactive approach by closely monitoring expenses and collections. They ensure that as sales increase, their cash flow remains healthy, preventing any financial setbacks.

5. Explore Alternative Funding

Action: Don’t rely solely on loans for working capital. Explore options like invoice financing to quickly access funds through outstanding invoices.

Good businesses understand that loans are not the sole solution for your business’s finance needs. They explore alternative funding options, such as working capital and cash flow financing. These strategies leverage your existing trade arrangements to make use of outstanding invoices and orders to secure quick access to funds, providing flexibility and ensuring a healthy cash flow.

6. Adopt Consistent Cash Flow Forecasting

Action: Make cash flow forecasting a regular practice to plan for growth and seize opportunities without surprises.

Cash flow forecasting isn’t just for tough times. Good businesses adopt a consistent approach to cash flow forecasting, enabling them to plan for growth and seize opportunities proactively. This practice ensures they are always prepared, minimising financial surprises.

7. Boost Sales and Optimise Receivables

Action: Instead of solely cutting expenses, focus on boosting sales and optimising receivables, as this often yields quicker results without compromising quality.

While cost-cutting can be effective, good businesses also recognise the power of boosting sales and optimising receivables. By increasing revenue and ensuring timely customer payments, they can achieve faster financial improvements without compromising product or service quality.

8. Speed Up Customer Payments

Action: Implement clear invoicing terms and a prompt follow-up process to accelerate customer payments.

Customer payments can significantly impact cash flow. Good businesses take steps to speed up payments by implementing clear invoicing terms and promptly following up on outstanding invoices. This proactive approach ensures a steady cash flow. You can also take advantage of financing options, like invoice financing, to get paid when you want and put your cash to work.

9. Optimise Inventory Management

Action: Avoid tying up excessive cash in inventory by optimising it to reduce carrying costs.

Inventory management is a critical aspect of working capital management. Good businesses not only optimise their inventory levels to reduce carrying costs but also leverage working capital financing to further enhance their cash flow. By avoiding excessive inventory, they free up cash that can be better utilized for growth, supplier negotiations, or investing in key business initiatives. This strategic combination of efficient inventory management and working capital financing ensures a healthy balance between maintaining the necessary stock levels and preserving valuable cash resources.

10. Encourage Team Collaboration

Action: Recognise that managing cash flow is a team effort. Encourage collaboration within your team to gather valuable insights and innovative solutions.

Effective cash flow management isn’t a one-person job; it’s a collective effort that involves everyone in your organisation.

Great businesses cultivate a culture of collaboration within their teams, acknowledging that employees from various departments can offer invaluable insights and innovative solutions that contribute to superior financial management.

When you implement cash flow and working capital financing strategies within your business, your organisational culture and your people will naturally become more financially literate and strategic in their day-to-day decision-making.

This elevated financial awareness, coupled with a shared alignment toward your financial goals, can result in heightened efficiency and improved financial outcomes. By optimising your financial transactions at scale through tools like Fifopay, you empower your team to make well-informed decisions that can significantly improve your cash flow and overall financial well-being.

The Takeaway

In conclusion, these ten habits are not just principles; they are actionable strategies that can drive success for SMEs in Australia. By adopting and consistently implementing these practices, your business can navigate the challenges of today’s competitive landscape and thrive in the long run. Good businesses are built on a foundation of sound financial management, innovation, and a customer-centric approach. Start incorporating these habits into your business today to experience the benefits they bring.

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