Businesses are complex organisations’ that rely on the seamless integration of many different parts to function. Managing cash flow, production, quality control, sales and marketing, taxes, payroll, and human resources is more than enough to occupy the time of any leadership team.

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Unfortunately, as a business begins to grow, their operations will only become more complex. This is an issue, because business leaders need to be able to focus outward and on the future. They need to be able to pay attention, and plan for what to do, with regard to their target markets, competitors, investors and innovative new ideas, if they want the business to compete and grow.

Getting the freedom to lead

To lead effectively, business owners and managers need to prioritise the most important leadership tasks. Those priorities, however, are different for businesses of different sizes. Entrepreneurs and CEOs of SMEs often attempt to maintain direct oversight over all, or most of, their business’ operations. At some point, many of these will hit a point where further growth becomes difficult from an organisational standpoint. As they grow, business leaders are forced to spend more and more of their time simply keeping the business running, leaving no time for innovation and growth planning.

In order to become larger businesses, they need to give themselves the freedom to keep leading the way forward. That means investing in tools and bureaucratic systems that make their operations easier to manage, and allow them to prevent potential problems. Doing this is the key to sustainable, long term growth for any large company, because it helps to provide leaders with time to focus on non-internal issues and the tools to develop and execute growth plans.

Better cash flow management

Cash flow management is one of the earliest and most significant challenges growing businesses face. The larger a business is, the more payments need to be made to suppliers and collected from customers. Also, the potential costs of a cash flow interruption, in terms of lost productivity, tend to scale with the size of the business, meaning that avoiding any interruptions is crucial. Because of this, businesses need to be able to quickly access funds to deal with budget shortfalls, regardless of why they might be occurring.

Invoice finance

This type of financing generates liquid capital by converting an existing non-liquid asset. Rather than waiting for payment, a business can exchange an unpaid invoice for a cash payment. The financial institution receiving the invoice will offer immediate payment in exchange, before going to the customer to collect payment when the invoice is due. At this point, any remaining funds are issued, minus a predetermined fee.

Supply chain finance

Rather than getting direct access to funds, supply chain finance allows businesses to work with their financial institution, which will pay suppliers on their behalf. The business will then pay the supplier payment to the financial institution at a later date, up to 90 days after the invoice was initially issued. Typically, this is designed to give the business time to use the purchased supplies to generate revenues needed to make payment. It can, of course, be used to make more time for any type of incoming revenues to arrive.

These tools are particularly useful because they don’t rely on debt. Instead, they allow businesses to fund themselves using their own assets. In both cases, they allow businesses to access funds quickly and easily, making more time for customers to make payment, and reducing the pressure to collect outstanding payments immediately just to keep the lights on.

Investing in technology

As an organisation grows, it becomes much more difficult to maintain oversight. Because of this, they need to begin to build a bureaucracy, providing the business structure, and lifting some of the burden on leaders. When doing this, it’s a good idea to invest in enterprise resource planning software, which is used to aggregate and help leaders to manage financial, HR, manufacturing, and supply chain information. This helps to minimise miscommunication between departments, and allows them to work together more easily. Most importantly, it gives business leaders a much clearer picture of their operations, and allows them to better plan for the future.

Planning a better future

Cash flow management tools, such as invoice and supply chain finance, as well as enterprise resource planning tools, simplify many of the tasks that business leaders manually deal with in smaller businesses, and allow them to be more easily delegated to others. Moreover, it helps businesses to anticipate problems, and to take preventive measures to avoid situations that would otherwise require intensive and disruptive action to manage. As a result, leaders spend less time reacting to problems, and can focus more of their energy on the success of the business going forward.

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