Money management strategies every small business retailer needs to know

The backbone of the New Zealand economy and the pillar of our communities are small businesses. Their importance to New Zealand’s inclusive and sustainable growth is substantial, and their significance to the economy should not be undervalued.

The operating environment for businesses is in a steady state of flux. Small businesses are constantly required to adjust to new business practises caused by climate change, expanding population diversity, and the huge effect of technology and now a worldwide pandemic. With small scale comes the ability to swiftly adapt and pivot in response to change. However, small enterprises may also be susceptible to greater influences outside of their control.

So how might one improve their finance management? Here are some important financial planning techniques:

Use financial planning and forecasting

It is beneficial to develop a financial strategy or framework in order to keep track of incoming and outgoing funds. For instance, one plan for your business may be to spend: 

For instance, one plan for your business may be to spend: 

  • 30% of earnings spent on business development (such as expansion of equipment or recruiting costs)
  • 20% of income on the growth, for creating new goods and services

Different plans work for different businesses, so you should consult with your accountant to determine which plan is ideal for you.

But situations change. Your financial strategy should be modified accordingly. Try to do a simple projection of your business for a minimum of next six months. Realistically estimate the amount you will sell and the amount you will spend. Incorporate these figures into your business’s financial strategy and see if the outcomes are still viable. If not, you may need to alter your strategy.

Invest in expansion and budgeting strategy.

In addition to paying yourself and your employees, it is crucial to lay away funds and seek growth possibilities. This can help your company prosper and grow in a financially sound manner. As business owners, you should always have an eye on the future

A small business that aspires to continue expanding, innovating, and attracting the most talented workers must demonstrate a willingness to invest in the future. The enhanced quality of service would be appreciated by customers. Employees will appreciate your investment in the organisation and in their careers.

Budgeting is not particularly difficult and establishing a budget does not need managing every dollar spent. Set a budget that will serve as a guide to aid you in making smarter spending decisions. In other terms, instead of viewing budgeting as a constraint, view it as a financial advantage for your organisation.

However, how do you budget? Here are some guidelines:

So, how do you budget? Here are a few tips: 

 identify your financial objectives

  • Compile your revenue sources
  • Overestimate your spending
  • Consider variable expenses
  • Focus on your sales cycle
  • Factor your time into your budget plans
  • Conduct frequent reviews of your budget

Reduce costs

You’ve probably heard the expression, “A penny saved is a penny earned.” When was the last time you attempted to determine the areas of your business that result in lower profits? If it occurred many years ago, the time has come to do it again.

Reducing company expenditures can involve the following strategies:

  • Reducing manufacturing costs
  • Decreasing supply costs
  • Negotiating with suppliers
  • Increasing productivity
  • Using virtual technologies
  • Maximising staff capabilities.
  • Maximize employees’ skills 

Have An Emergency Fund 

Economic changes, legislation or the tax environment, and even industry trends can all result in financial changes for a business, and this can be quite unsettling for a business that lacks a financial safety net.

As a small business, it may appear difficult to accumulate the funds necessary for an emergency fund. Nonetheless, there are strategies to save money without severely reducing your available finances, such as:

  • Save about 10 per cent of your yearly revenue
  • Automate your savings so you don’t have to think too much about them
  • Cast aside funds during high-sales months, such as the holiday season.
  • Periodically revaluate your running expenditures and set aside any excess funds.